Unfinished Homes: Show Me the Money

Tomorrow’s Headlines Today 07/19/2022

Here is a summary of the local financial news from China that you need to know. For more information about this column, please read this. To stay in the loop and be the first to know, hit the subscribe button now.

New Measures to Deal with the Off-plan Home Construction Problems

With respect to the recent mortgage defaults on off-plan homes, several local governments are introducing new measures and tightening the regulations to deal with the complaints. The sales proceeds (including down payments and the mortgages) must go into a “regulated account” (escrow account). And the money need to be appropriated accordingly based on the progress of the construction project. Source: Daily Economic News (每日经济新闻)

Qi’s comments: Not much new here. The local governments and banks should properly manage the escrow accounts in the first place. Also, we need funding for the projects that are short of cash. Show me the money.

Local Governments to Issue a Fresh Round of Consumer Vouchers

Beginning July 18, a new round of consumer vouchers will be offered by local governments to boost the consumer spending. Analysts expect the domestic consumption to gradually improve in the second half. Source: Securities Daily (证券日报)

Qi’s comments: China need to stimulate the consumption urgently (circa 50% of the economy and slowing significantly). The mortgage defaults above are causing further damage to consumer confidence, which is difficult to fix in the short-term.

Shanghai Economy Has Reportedly Recovered 94%

The GDP of Shanghai, China’s economic and financial center, reached RMB 1.9 trillion (USD 287 billion) in the first half of 2022, according to Shanghai Municipal Bureau of Statistics and National Bureau of Statistics. This is equivalent to 94.3% of the GDP level a year ago. Source: Shanghai Securities News (上海证券报)

Qi’s comments: Shanghai went through an extended lockdown in from March to May, when the economy basically stalled. On one hand, not everyone is optimistic about Shanghai’s recovery. On the other hand, the news does show the resilience of the Chinese economy.