China Economic News

[Behappyalways]

Chinese FX Outflows Soar To Highest Since 2015 Devaluation, Priming Next Bitcoin Surge
https://www.zerohedge.com/markets/chines...coin-surge


The number of registered companies data used to be a good indicator of China’s private economy strength. But now it’s KPI for local government officials, then fraud becoming prevalent.

News of village people ID stolen to be registered with private companies.
https://x.com/liqian_ren/status/1790943321394708870

[dreamybear]

For some time already, I have been pondering why is China so keen in making EV despite tariffs/trade barriers and the possible risks of oversupply.

Looks like I have my answer but given the super EV manufacturing powerhouse China is, I am still wondering whether there will be sufficient export demand for all the China EVs.

https://www.businesstimes.com.sg/interna...new-energy

[CY09]

The rationale is sound but the scale that China EV companies has built up the capcity is unsound.

Due to the large scale factories and cost of tech, only 2-3 china EV companies are profitable. The rest are trying to grow revenue to outpace cost to become profitable. Europe and South East Asia helped to add scale by becoming export markets, enabling all Chinese EV to lower the unit cost of production. However, tariffs and declining demand overseas is forcing them to cannabalise each other at home. This causes lower average revenue per unit.

Li Auto was supposed to turn profitable, however, due to a price war it has swung to losses. Nio too is not spared, making a few billion losses each year. The way China has created a manufacturing overcapacity is similar to what it has done in other manufacturing sectors. No doubt new EV factories helped to create jobs to fill the massive number of employees entering the workforce each year. However, building factories without real demand creates overcapacity. I have no solution to China's problem, but it really has to consolidate its manufacturing activity. Lots of unemployment is going to happen. Shanghai region will be the worst hit being the EV manufacturing hub.

[dreamybear]

The rationale is sound but the scale that China EV companies has built up the capcity is unsound.

Due to the large scale factories and cost of tech, only 2-3 china EV companies are profitable. The rest are trying to grow revenue to outpace cost to become profitable. Europe and South East Asia helped to add scale by becoming export markets, enabling all Chinese EV to lower the unit cost of production. However, tariffs and declining demand overseas is forcing them to cannabalise each other at home. This causes lower average revenue per unit.

Li Auto was supposed to turn profitable, however, due to a price war it has swung to losses. Nio too is not spared, making a few billion losses each year. The way China has created a manufacturing overcapacity is similar to what it has done in other manufacturing sectors. No doubt new EV factories helped to create jobs to fill the massive number of employees entering the workforce each year. However, building factories without real demand creates overcapacity. I have no solution to China's problem, but it really has to consolidate its manufacturing activity. Lots of unemployment is going to happen. Shanghai region will be the worst hit being the EV manufacturing hub.

This EV overcapacity reminds me of its property woes which have been ongoing and do not seem to have an end in sight(yet). 

These issues, coupled with geopolitical tensions, probably take years(or many years) to play out. 

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https://en.wikipedia.org/wiki/Chinese_pr...93present)

https://www.straitstimes.com/business/ch...isappoints

[CY09]

Hi Dreamybear,

Yes it bears resemeblance. In the last 2-3 years, to displace Property and construction from being the No1 contributor to China's economy, China focused on expanding the manufacturing capacity of Solar and EV companies. Firstly, to replace GDP and secondly to ensure job for displaced workers of real estate and the increasing no of graduates joining the workforce. More EV factories were built to meet job needs and partly due to greed from new EV companies to jump on trends.

But this massive oversupply means China companies has to produce many cars to breakeven. The result is that many EV companies are making large amount of losses. Hence, as i said, many EV factories will consolidate and Chinese will lose their jobs. Lots of company wealth is now being lost or is in the process of being lost (Nio (bailed out once by China) is losing US$700 million per quarter, Li Auto US$80 million quarter, Xpeng US$150 million per quarter). In the solar side, many solar companies are losing money as well. Yingli Solar went down and is receiving state aid.

I am not surprised due to the loss being accumulated by many of these EV and solar companies, China has been unoffically subsidizing their operations

I do not know what new sector China will try to focus on to ensure jobs are there for its citizens. Without jobs, it leads to political distability. The social compact the communist party has with its people is that as long as there are jobs, its people will not interefere with the communist politics.

However, what China has frequently done in policies over the last 5 years has been too extreme. It is true it just has too many students entering the workforce each year

[dreamybear]

China's banking turmoil: 40 banks vanish, Jiangxi leads collapse
https://www.msn.com/en-ie/money/other/ch...r-BB1pKGjU

According to the article, the China banking sector is facing a crisis. It probably takes time to address structural issues facing the Chinese economy. On the other hand, the US banking sector is also facing some stress.

https://www.cnbc.com/2024/05/01/why-hund...ilure.html

Whether China or US banking sector, I guess investing in the biggest banks is probably the safest bet.

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https://www.straitstimes.com/business/ch...trade-data
"China’s exports grew at their fastest pace in 15 months in June, suggesting manufacturers are front-loading orders ahead of tariffs expected from a growing number of trade partners"

I think the word to note is "growing".

Indonesia Announces Hefty Tariffs on Chinese-made Goods
https://thediplomat.com/2024/07/indonesi...ade-goods/
"Speaking to reporters, Trade Minister Zulkifli Hasan said that the trade conflict between China and the United States had prevented China from offloading its oversupply on many Western countries. This has led it to redirect exports to other markets like Indonesia, threatening the country’s smaller businesses with “collapse.” "

Will more countries(e.g. non-Western) follow suit at some point in time ? 

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https://www.straitstimes.com/business/ma...g-quarters
"Mapletree Logistics Trust (MLT) expects negative rental reversions in China to persist over the next few quarters, with expiring rental rates being marked to market, said its manager on July 11.

The manager noted that China is facing “a challenging leasing environment” amid a weaker-than-expected post-pandemic economic recovery and a healthy supply of warehouse space."

are conditions not going to see recovery for longer ?

[Behappyalways]

中國大陸高級餐廳退場潮 上海外灘法餐倒閉傳欠薪｜TVBS新聞
https://m.youtube.com/watch?v=06eM6KHnm7I


中國大陸消費降級 鼎泰豐.侯布雄熄燈 吸外國客.年增四倍 ｜方念華｜FOCUS全球新聞 20240828 ‪@tvbsfocus‬
https://m.youtube.com/watch?v=ITUEcDjO31s

[Behappyalways]

中國青年失業率再創高17.1%　實際數字可能更可怕　畢業季1100多萬名畢業生前景渺茫｜全球聊天室｜#鏡新聞
https://m.youtube.com/watch?v=NbsPGffoxsg

[gzbkel]

It’s no longer glorious to get rich in China — it’s dangerous

Last month, Colin Huang, founder of ecommerce powerhouse PDD, attracted the usual headlines when he rose to become China’s richest man. But shortly after, PDD surprised investors with a downbeat profit forecast. Its stock plummeted. Huang lost $14bn overnight, and ceded the top spot to Zhong Shanshan, founder of beverage giant Nongfu Spring. Within 24 hours, Nongfu Spring issued its own unexpectedly depressing outlook, and Zhong, too, soon slipped from first place on the rich lists.
On Chinese social media, chatter broke out about whether corporate leaders might be competitively devaluing their own stock prices to avoid the widening crackdown on excessive wealth, which is a centrepiece of leader Xi Jinping’s “common prosperity” campaign. It is not implausible to conclude, wrote one Wall Street broker, that “nobody wants to be the richest man in China” at a time when its government is turning more assertively socialist.
[...]

https://archive.ph/DDU8t

[weijian]

I reckon it is hard not to get rich when you have the best of both worlds - some sort of state protection (against foreign giants) with a huge local economy, but yet able to get your stock listed elsewhere for "better valuations".

But I disagree it is dangerous for those "founders". These founders are VIP partners to the CCP. An extract from Howard Marks' latest memo "Shall We Repel the Laws of Economics" as below:

China’s private sector is often summed up with a combination of four numbers: 60/70/80/90. Private firms contribute 60% of China’s GDP, 70% of its innovative capacity, 80% of its urban employment and 90% of new jobs.

But nonetheless, it is still dangerous - pretty risky for the folks who invest together with these "founders", since the "structure" doesn't look aligned here.