Chinese home prices falls accelerate

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Cross posted from Investing in Chinese Stocks:

The CREIS report for December shows home prices fell again, and at a slightly faster pace. A refresher: in November, prices fell 0.38% nationally, less than the 0.40% drop in October. 76 out of 100 cities saw prices fall in November. In December, prices fell 0.44% nationally, but only 70 cities saw falling prices last month as market continues to show signs of bifurcating. Volatility also continued to decline in terms of the number of cities with large price drops. Only 27 cities saw new home prices fall more than 1% in December, down by 10 cities from November.

In sum, although the year-on-year number looks worse (down 2.69% in December, larger than November’s 1.57% yoy drop) and will continue to worsen into the first part of 2015 due to the price peak starting around April-May, the housing market decline is still decelerating.

The most surprising number was the 3.25% drop in Wenzhou, the worst out of all 100 cities measured. Wenzhou’s housing market topped in 2011 and it looked as though it would bottom out in 2014, but prices have started sinking at an accelerating pace.

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China’s northeast provinces are indeed in trouble and this trend has been noted:

In July: Xilin Steel on Verge of Bankruptcy. Xilin is the largest steel company in Heilongjiang.

In October: Liaoning Sounds Warning on Chinese Economy

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In December: Why Is Oil Down? China’s “Open Secret” Slowdown

The Economist has noticed: Back in the cold (Alternate: Back In The Cold)

Those efforts have borne fruit: state-owned firms produced more than two-thirds of the region’s GDP in the early 2000s. That has fallen to about 50%, still above the national average of 30%, but progress nonetheless. The structure of the north-east’s economy, however, has worsened in a more important respect. It has become ever more reliant on investment and manufacturing, both geared to the now-slowing property market. State companies and private firms alike have poured into mining, heavy-equipment factories and construction. Even the car industry, in which the north-east has been a national leader, is closely linked to property, as buyers of new homes also tend to buy cars. In any case, home-grown car brands such as Hongqi and Jinbei are falling further and further behind foreign rivals in popularity.

Whereas the rest of China’s economy has become better balanced, with services now accounting for more of GDP than manufacturing, the north-east has gone in the other direction. Manufacturing’s share of the regional GDP rose to 50% in 2013 from 47% a decade earlier, and the contribution of services declined—the opposite of what the original revitalisation plan called for. Even more striking, investment accounted for 65% of the north-east’s GDP in 2013, roughly double its contribution a decade earlier. The national average is a shade under 50%, which is already high by international standards.

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With November industrial profits suffering their sharpest fall in 27 months, dropping 4.2 percent in November to 676.12 billion yuan ($108.85 billion), official data showed on Saturday, the biggest annual decline since August 2012 as the economy hit major unexpected headwinds in the second half.

Despite last month’s drop, profits for January-November were 5.3 percent higher than in the first 11 months of 2013, according to the National Bureau of Statistics (NBS) data.

The NBS attributed November’s profit drop to declining sales and a long-running slide in producer pricing power.

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From the NBS, sales in yellow, profits in blue:

Mining profits are down 21.6%. State owned companies down 3.5%. Private industry up 7.2%. More here.