Chinese Media: China Loses All Out Trade War

QQ.com: 贸易战爆发,楼市面临三种选择!
Many Chinese people may not know that China basically gave up the production of soybeans. Taking just 2017 as an example, China imported 95.54 million tons of soybeans, which is equivalent to the import of 136 pounds of soybeans for each Chinese person. And China's own production of soybeans will be less than 15 million tons in 2017.

In other words, in the soybean crop, China's "import dependency" reached about 87%, far more than oil and natural gas.

Why did China basically abandon the production of soybeans? Because China's output is low, the demand is very large. If China does not import soybeans, it must produce about one-third of its arable land to grow soybeans, so that the Chinese will need to import large quantities of wheat and rice.

In other words, China’s current arable land is obviously not enough to maintain the high quality of life of 1.4 billion people. Therefore, China basically gave up its low-yield soybeans and relied on imports. Soybeans are mainly used as feed (oil can also be pressed), feeding China's 430 million pigs, as well as other poultry and livestock, and eventually converting to Chinese people's need for meat.

At present, 70% of the soybeans that can be traded globally are bought by China. Among them, Brazil produced nearly half of the "imported soybeans" for China, followed by the United States. In 2017, China imported 32.85 million tons of soybeans from the United States, accounting for one-third of China's imports, amounting to approximately US$12 billion, exceeding the amount of Chinese imports of automobiles and aircraft from the United States.
What about home prices?
In other words, if there is a trade war between China and the United States that exceeds a medium or large scale, China's CPI will surely jump. If you approach 3%, the central bank will raise interest rates will become inevitable.

In the United States, because residents' daily lives are highly dependent on Chinese products, inflation will also increase after a general increase in taxes on Chinese goods. This will eventually force the Federal Reserve to raise interest rates at a faster pace.

In this sense, the trade war between China and the United States constitutes a bearish for the property market of both countries, because it will bring about an increase in interest rates.

According to data released by the Chinese side, China exported US$429.8 billion to the United States in 2017 and US$153.9 billion from the United States. It can be seen that if China and the United States have a full-scale trade war, China will be affected more than the United States. Loss of jobs may be several times or even ten times that of the United States.

...Under such circumstances, if there is a sharp decline in trade with the United States, the unemployment rate will increase, and it will be forced to raise interest rates. At this time, the interest rate of the property market may fall.
Three possible scenarios for housing:
 1. Trade wars below the medium or medium scale have negative impact on the property market because China will stabilize the exchange rate of the RMB (and slightly appreciate). At the same time, China will carefully maintain the spread between China and the United States. When the United States raises interest rates, China will guide interest rates upward.

2. In the large-scale trade war, China’s unemployment rate has risen, input-type inflation has occurred, and the rate hike has been forced to raise interest rates. The increase in interest rates for the housing market has started to decline or cancel, and the property market will be moderately loosened, affecting the preferences of the property market, but house prices will not be affected. Allowed to soar.

3. China and the United States completely turned their backs. At this time, China’s unemployment rate has soared, input-type inflation has occurred, and interest rates have been forced to raise interest rates. The regulation of the property market may be reversed. The renminbi may depreciate sharply, and house prices will rise in a new wave. Of course, under the renminbi valuation, everyone’s wage income has also increased significantly. Before buying a home in 2017, the mortgage pressure suddenly dropped dramatically. On the whole, the possibility of the first two situations is relatively high, and the third situation is extremely unlikely.
This is why Trump has the upper hand. Escalation results in mass unemployment in China and it will be forced to defend the currency and raise interest rates, or risk a tumbling yuan.

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