China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

Continue Reading

Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

Continue Reading


Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

Continue Reading


China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

Continue Reading


Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

Continue Reading

Categorized | Property

China braced for impact of property slowdown

Posted on November 20, 2016

China’s attempts to cool its overheated property market appear to be working, with many analysts forecasting a housing market slowdown in 2017 — but stagnant prices are likely to bring problems for other parts of the world’s second-largest economy.

Data released on Friday showed that price growth had slowed sharply in top-tier cities such as Beijing and Shanghai. For the first time in two years, prices grew more slowly in such cities than in the overall urban market, according to the National Bureau of Statistics.

The data seemed to vindicate official measures announced last month to restrain individuals from buying homes and developers from borrowing money.

China’s housing market, however, is an important driver of economic output: construction and real estate made up a fifth of real gross domestic product growth in the first half of this year, according to China International Capital Corporation. Not included in that figure is the demand for building materials, machinery and commodities.

As a result, the government has had to make a trade-off between high economic growth and increasing house prices. Last week, the investment bank UBS projected China’s growth will fall from 6.7 per cent to 6.0 per cent in the next two years largely as a result of the property downturn.

“The major reason the Chinese economy stabilised this year, in addition to the major fiscal stimulus, was the property market recovery in the first three quarters,” said Chi Lo, senior economist at BNP Paribas.

“Construction contracts have fallen this year across China, as well as demand for materials such as concrete and aluminium for windows and doors,” said Terry Li of CY Infotech, a construction technology company in Beijing. “We expect construction contracts to continue to fall next year as the controls on financing to developers kick in.”

Last month, the government started restricting property developers from issuing bonds in the mainland and in the Hong Kong offshore market. No new bonds have been issued by developers so far this month, according to data compiled by economics consultancy Gavekal Dragonomics.

“It’s likely that the government will expand infrastructure investment to make up for the gap left by property-related investment falling,” said Julia Wang, China economist at HSBC.

Ms Wang noted that infrastructure investment is often used to stabilise economic growth when other sectors are weakening. She estimated that for every one percentage-point fall in property investment, the government would have to increase infrastructure investment by 0.7 percentage points in order to keep growth stable.

Outstanding mortgage loans have soared this year to more than a fifth of total gross domestic product, according to official data from Wind, a financial data service. But the chance of a US-style housing market collapse was small, Mr Lo said.

He pointed out that Chinese mortgages were rarely repackaged and sold on to other investors. As a result, the domestic market lacked the links between the housing market, lenders and the financial markets that are common in the west.

“The key issue from this [property market] correction will be with developers, not with homebuyers,” said Mr Lo. “When transactions drop, as we saw earlier, this hurts cash flow and the ability of smaller developers to repay loans. Over the last property cycle we saw developers going under, and we could see further consolidation happen again.”

So far, developers in top-tier cities are still cash-rich from this year’s high sales. For China’s younger generation, particularly those from regions in industrial decline, the job opportunities that cities such as Shanghai provide will ensure high demand for housing. Together with the limited opportunities for financial investment, pent-up demand for top-tier housing is still high.

James Macdonald, head of research at Savills in Shanghai, said: “The [property] slowdown is essentially policy-driven. If the government finds they have slowed the market too aggressively, they have the ability to bring the market up again.”