Property debt "slowly engulfing Chinese economy," US hits China with new AI chip restrictions & China warns countermeasures after US approves $1.1bn in Taiwan arms sales -- China Boss News 9.05.22

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Contagion from property debt crisis "slowly engulfing Chinese economy"

“China’s biggest property developer Country Garden Holdings has reported a 96% drop in profits, blaming a ‘severe depression’ in the country’s crisis-hit property market in which ‘only the fittest can survive,” The Guardian’s Martin Farrer said.

The company which has “thousands of property projects and a footprint in nearly 300 municipalities” reported its “preliminary net profit collapsed from 15bn yuan ($2bn) to 612m yuan ($88m) in the first six months of the year thanks to the housing market crisis that is slowly engulfing the Chinese economy,” Farrer added.

Farrer, The Guardian:

[Country Garden] had warned earlier that profits could fall up to 70% and the even bigger than expected drop came with a grim warning in a statement to the Hong Kong stock market.

“In 2022, the property sector faced myriad challenges, including the market’s weakening expectations, sluggish demand and a fall in property prices,” the company said.

“All these exert mounting pressure on all participants in the property market, which has slid rapidly into severe depression. The harsh business environment in which only the fittest can survive means even higher requirements for businesses’ competitive strength.”

The astounding descent of another one of the country’s most successful property developers underscores a pivotal moment in China’s “battle to contain what could be the biggest property crash the world has ever seen,” Farrer wrote in an earlier report.

To make matters worse, the recent lock down of tens of millions in large swathes of China’s industrial and technology hubs is “a new blow” to China’s struggling economy, Aljazeera analysts wrote. Authorities ordered people to stay home in Hebei, the province surrounding Beijing, the Chinese tech hub of Shenzhen, as well as in Dalian and Tianjin, two major port cities. And - if that wasn’t enough - there’s an extreme heat-weave pummeling livestock and crop production and threatening China’s power and food supplies, Reuters said.

Reuters:

The southwestern region of Chongqing has been hit especially hard, with one resident, Zhang Ronghai, saying that both his water and his power had been cut after a four-day mountain fire in the district of Jiangjin.

"People need to go to a power centre over 10 km (6 miles) away to charge their phones," Zhang said.

Fitch Ratings analysts are factoring in the challenging conditions while monitoring the nation’s property market. Tyran Kam, Head of China Property, told Bloomberg Markets and Finance (see YouTube video below): “I think the recent news in terms of mortgage boycotts … we’re worried that those kind of sentiments could spread and home buyers will actually walk away from the private developers because sales remains the key for them to generate cash.”

When asked by Bloomberg whether China’s traditional bad debt managers - like Huarong, Cinda, Great Wall and China Orient Asset Management Co. - “could be a potential white knight” that would stabilize the industry, Tam responded that “the scale of the issue is so large, no single party is able to step in,” and that, rather, a reversal of policy - something that does not appear to be on the horizon - might work.

For the rest of Ferrar’s analysis in The Guardian, China’s biggest property developer Country Garden sees profits plunge 96% and Point of no return: crunch time as China tries to fend off property crash, click here and here. For Aljazeera’s update on the extended Covid measures, China places millions in lockdown, dealing new blow to economy, click here. For Reuters’ report, China faces heatwave havoc on power, crops and livestock, click here.

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