China is in obvious economic difficulties. This is confirmed by the most recent macroeconomic data, especially those that speak of deflationand also the story of some large Chinese companies active in the sector real estate development. It is the case of Country Garden Holdingsone of the largest Chinese real estate developers in terms of turnover, which announced huge losses (well over 7 billion dollars) and the difficulty to pay the coupons on its bonds denominated in dollars for an amount of 22.5 million dollars.
A cold shower for investors, especially those who have bet on the effervescent Chinese real estate market, after words of support arrived last month from the political meeting of the Communist party, which had seemed inclined to offer a help for struggling developers and had promised to “adapt and optimize the property policy in a timely manner”.
Country Garden’s problems popped up in one critical week for China
Clear economic difficulties are confirmed, starting with deflation. THE consumer pricesindeed, they decreased by 0.3% in July, fueling fears of deflationary pressures, while Chinese exports dropped by 14.5% and i bank loans they grew at the slowest pace in 14 years, despite the recent cut in interest rates.
A pool of negative data that could find confirmation this week: tomorrow the data of the retail salesexpected to grow by 4.8%, and of industrial production, which should signal a 4.5% recovery. Worse data could validate the prospect of an economic slowdown despite repeated promises of stimulus from Beijing and the Chinese central bank. Promises that have not yet been matched by the data.
At the end of last month’s political meeting, Chinese leaders defined this year’s economic recovery as “tortuous”, but the picture is far worse than what the Communist Party claims and reflects decades of authoritarian policies and choices that have aimed on the rise of the real estate sector which is now in the midst of a structural decline.
(Photo: Natálie Šteyerová)
(Ticker)