2021-09-24

Here We Go Again, Again: China's Housing Market Freezes

ZH: “The Housing Market Is Almost Frozen" - An Even Bigger Problem Emerges For China
In a letter to the Shaoxing municipal government in eastern Zhejiang province, the local office of developer Sunac China appealed for “policy assistance” as it was struggling through what it called a "turning point in China’s real estate industry."

"We have never experienced such a radical change in the external environment," Sunac’s Shaoxing office said, pointing to a 60% year-on-year fall in home sales over the summer.

"The market is almost frozen," it added in the letter, which was first reported by the Financial Times. “The radical change in policy and environment has seriously disrupted our business and made it very difficult to maintain normal operations.”

In September 2014 (the Fed's taper ended in October) I posted the following over a period of a few days. In chronological order:

Handan Residents Afraid to Buy Homes; Market Frozen With Developers on the Brink

Credit Bubble Collapses in Handan; Arrests Made; Developers Repaying Suppliers With Property

Handan Credit Bubble Affects Entire City Economy

Handan Developers Try to Repay Debts With Homes

Third Tier Cities Bottoming, Handan Collapse Exaggerated (headline pulled from quoted Chinese article)

A month later, I posted: Liaoning Sounds Warning on Chinese Economy. Handan is not in Liaoning, but Liaoning was an even more industrial province than Handan's Hebei. Liaoning suffered with commodities peaking in 2011. It had turned to real estate to lift economic growth. Much as China has done to the whole nation at various times in the past decade.

The next summer, China stopped defending the yuan and allowed a "shock" depreciation in the currency.

Last time, the Fed was almost finished with its taper when the wheels starting coming off the Chinese economy. This time they haven't even tapered yet. A difference is the U.S. Dollar Index hasn't shot higher yet, but if that is coming...another difference is China's credit bubble is far larger, with less room for support...and U.S. stocks and Chinese homes are at an incredible apex. It sure looks like a major cyclical turn is coming. The only question I have is whether global currency depreciation against commodities (most importantly gold) is in the cards.

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