Real estate price must fall and controlled otherwise CCP 2&3 child policies will fail , because most of the couple told that housing prices is the reason why they don't want more kids or even get married, both marriage rate and birth rate are falling very quickly and too much rise of real estate prices is one major problem.
Chinese Economics Thread
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China's local government revenue already collapsed with the local government's land sales. Real estate is back because there is no other way. They should try to aim to keep the sales and prices stable and wait until wages and inflation reduce the real price of the real estate. The collapse of real estate = no money
China Budget Deficit Keeps Widening Under Covid, Property Crisis
China’s broad fiscal deficit widened to a fresh record in the first eight months of the year as land sales continued to drop while efforts to contain Covid outbreaks added to the spending burden.
The deficit in the budgets for all levels of government was 6 trillion yuan ($857 billion), according to Bloomberg calculations based on data from the Ministry of Finance Friday. That is a new high for any comparable period and compares with a shortfall of 1.1 trillion yuan in January-August last year and a gap of 4 trillion yuan at the same point in 2020.
The data show the fiscal strain faced by the government is yet to ease, even though the dent in income from this year’s massive tax breaks has started to taper while the economy showed some in August. The imbalance could lead governments at different levels to cut expenditure and limit their ability to spur economic growth.
Covid lockdowns over the summer and have forced factories, restaurants and shopping malls to shut, weighing on tax revenue generation. Income from land sales continued to drop as a property market crisis .
In the meantime, spending needs are rising as China Covid curbs in the run-up to the 20th Communist Party congress, a once-in-five-years meeting where President Xi Jinping is due to secure a precedent-breaking third term in office. For instance, local governments have been asked to test residents regularly for coronavirus, regardless of infection levels.
Note: A positive number for balance means surplus, while a negative figure indicates deficit. Source:
AUG. JULY JUNE MAY APRIL MARCH FEB. YEAR-TO-DATE 2022 2022 2022 2022 2022 2022 2022 BILLION YUAN Augmented fiscal balance -6,020 -5,245 -5,052 -2,970 -2,056 -1,250 309 General public budget balance -2,713 -2,177 -2,367 -1,232 -664 -155 798 General public revenue 13,804 12,498 10,522 8,674 7,429 6,204 4,620 General public expenditure 16,518 14,675 12,889 9,906 8,093 6,359 3,823 Gov. fund balance -3,306 -3,068 -2,686 -1,738 -1,392 -1,095 -488 Gov. fund revenue 3,998 3,338 2,797 2,195 1,757 1,384 916 Gov. fund spending 7,304 6,406 5,483 3,933 3,149 2,479 1,404
Income from general public and government funds combined came in at 17.8 trillion yuan in January to August. General public revenue fell 8% from a year earlier, slowing from a 9.2% drop in the first seven months. It would have risen 3.7% had it not been for the tax rebates, the finance ministry said.
The government doled out more than 2.3 trillion yuan in tax breaks in the first half, nearly 90% of the relief planned for this year, according to Bloomberg calculations based on MOF .
Revenue from the sale of land dropped 28.5% on year in the first eight months of 2022 to 3.4 trillion yuan, compared with a 31.7% slump in January-July.
Total spending was 23.8 trillion yuan. It includes 16.5 trillion yuan in general fiscal expenditure, which covers education, healthcare, defense and scientific research. That was up 6.3% on year, compared with a gain of 6.4% in the January-July period. Expenditure under the government fund budget rose 23.4%, down from a 29.8% jump in the first seven months.
Other highlights of the MOF release:
- Income from deed taxes, which are paid when a property is bought or sold, fell 28.7% on year in January-August
- Tax revenue from vehicle purchases slumped 30.5% in the period, as a policy to halve the levy paid on some new passenger cars continued to cause an impact
- Revenue from taxes on corporate and individual income gained 2.5% and 8.9%, respectively
- State-owned land use right transfer expenditure, a part of which is invested in infrastructure, fell 12.2% to 3.9 trillion yuan
China’s fiscal woes highlighted as local authorities turn to fines, traffic tickets to boost revenues
China’s Fiscal Stimulus Exceeds 2020 Levels, Barclays Says
Absolute prices don't matter, the mortgage to income ratio matters. Chinese salaries are increasing at almost 10% a year, so stable house prices are fine and less disruptive than falling prices. So 2 years of constant prices mean housing is ~20% cheaper. You wouldn't want prices to fall to rapidly so that young couples who bough recently have to sell because they can't afford the mortgage payments and are then unable to have a child
The entire model where land sales prices make up a big chunk of local government revenue was broken a long time ago and it should have been reformed. It wasn't reformed because it is politically very difficult and painful - and why rock the boat when times were good? Well, that inaction is now coming back to bite CCP in the ass.
Yes, you do. Prices need to fall 70% - minimum. How many young Chinese couples cannot even have ONE child because of the nose-bleed level prices? Forcing them to live on much smaller space than you can raise a family on and sometimes even living separetly.
When it comes to a major housing correction, you cannot protect everyone at the same time so you must make priorities. Just like in medicine with triage. The insane real estate prices in China is a key impediment to family formation. It's not the only one, but it's a big one.
People should look at price-to-income ratios in Tier 1 cities in China vs USA. The prices in the US are downright cheap by comparison. Frankly the land prices/real estate nexus is one area where CCP fucked up the most. I think they get very high marks on R&D, innovation etc. But on housing affordability, they just completely dropped the ball.
Yes, you do. Prices need to fall 70% - minimum. How many young Chinese couples cannot even have ONE child because of the nose-bleed level prices? Forcing them to live on much smaller space than you can raise a family on and sometimes even living separetly.
When it comes to a major housing correction, you cannot protect everyone at the same time so you must make priorities. Just like in medicine with triage. The insane real estate prices in China is a key impediment to family formation. It's not the only one, but it's a big one.
People should look at price-to-income ratios in Tier 1 cities in China vs USA. The prices in the US are downright cheap by comparison. Frankly the land prices/real estate nexus is one area where CCP fucked up the most. I think they get very high marks on R&D, innovation etc. But on housing affordability, they just completely dropped the ball.
Singapore has cheap state provided houses and tfr is miniscule. The prices of real estate is not a big factor for TFR, modern life/culture is.
And so what tier 1 cities have high prices? How many people live there compared to the whole country? On average Chinese Real Estate is not that expensive, however is not cheap.
This is the average Chinese city, where the average Chinese person lives, and what the price of average real estate is? 6k rmb/m2
One plus no one mention of the bubble is the rent. In not the top areas of the cities, you can rent and live crazy cheap.
And so what tier 1 cities have high prices? How many people live there compared to the whole country? On average Chinese Real Estate is not that expensive, however is not cheap.
This is the average Chinese city, where the average Chinese person lives, and what the price of average real estate is? 6k rmb/m2
One plus no one mention of the bubble is the rent. In not the top areas of the cities, you can rent and live crazy cheap.
Have you ever live in one of the tier 1 cities? Have you been to the marriage corner of People’s Square in Shanghai? Every single ad for husband there listed owning an apartment as a requirement.
In some cases, you are required to pay 70% as down payments in some tier 1 cities vs. the standard 20% in the U.S. First time buyers often qualify for down payments as low as 5% in the U.S.
I think China will see continued sequential growth in the 4th quarter. Zero Covid will prob ease somewhat as the government shifts focus to economic recovery after the Party Congress. External demand based on export growth will remain good. Prob see growth of 3-4% in the 4th quarter if covid policies can be relaxed. Overall annual growth can still be around 3%. Not too bad.