China property challenges mount

Cross-posted from Investing in Chinese Stocks.

The Chinese property market faces another big test as demographics peak in 2015. The 20-64 age cohort will begin declining and negative growth rates will exceed those of Japan eventually, a legacy of China’s family planning policies.

The article quotes from a Founder’s Securities report. The first finding: there will be “more houses than people.”

Chinese women of childbearing age 15-49 years and 20-29 overall golden age of women childbearing age (two-thirds of children born to women in that age group) are negative growth beginning in 2012, of which the former will decline from 383 million in 2011 to 293 million in 2030, the latter will decrease from 115 million in 2011 to 66 million in 2035.

…China’s population structure will become very unstable “inverted triangle” in the future. In a nutshell, “born too few, old too fast.” The most direct reflection of the property is: “fewer people, more houses” especially in the large cities with inventory, not only need not steal a house, also unable to sell.

The second finding: the demographic dividend is gone:

20-64 years old labor force in 2015 after the start of negative growth, the rate of decline will be more than Japan, which we call the “demographic turning point.”

…In Japan and Europe, some countries and regions, the population aged 20-64 in 1998, after a negative growth peaked in 2010, they are at an inflection point on the eve of the economic crisis. For example, Japan, in 1980, the heyday of economic development, urban land prices continue to rise, especially in the premium Tokyo, Osaka and other six cities since 1985, an annual double-digit increase in the prevalence of the “myth of land did not fall.” But after 1992 the demographic turning point, the real estate bubble burst, a substantial decline in land prices.

The third: population inflow to top cities will mask demographic effects:

In 2013 China’s highes revenue public finances 50 cities, Shanghai’s population has 9.535 million net population inflow number one in China; the net inflow of capital, Beijing, the number of population of 7.718 million, the population ranked second; Shenzhen in third, a net inflow of population number is 7.56 million. Guangzhou net inflow of population reached 4.61 million, ranked fifth (see table).

Law interpretation:

The net inflow of population is a dynamic urban housing prices is a very important condition. Statistics, the net inflow of more than one million of the city a total of 22, currently the highest prices of basic urban China have emerged in 22 cities inside. Visible, population inflow and Price Change basic proportional. Flow into the more often rise faster. How did the inflow or net outflow, house prices rose almost no power.

In general, the economic development of the city with high quality public resources and good employment opportunities for migrants in a strong attraction, a lot of movement of people to cities, the very strong desire to integrate into the big city, it also makes great the city formed a “cluster effect basin.” While pushing housing prices there are other factors, but the demographic indicators in the “net inflows” is also a very important reference.

iFeng: 2015人口拐点来到 楼市面临史上最严大考

Meanwhile, without a realty boom, local governments are starved of cash, China tycoon sues six local governments for late payments:

One of China’s richest men is suing six local governments for late payments on infrastructure contracts, in a rare legal action that highlights the risks of unpaid debts cascading through the country’s economy.

Local government borrowing has risen steeply in recent years, with much new credit used to service existing debt, raising fears that local defaults could spark a full-blown financial crisis.

Mr Yan Jiehe, founder of China Pacific Construction Group (CPCG), said on Monday his company’s legal actions were the first such suits launched against local governments. “We will appeal all the way to the Supreme Court if necessary,” Mr Yan told The Financial Times in a telephone interview. “We will surely win this case. The records and evidence are clear.”

Dead realty demands increasingly desperate subsidies:

 Ziyang in eastern Sichuan is offering home buyers 7000 yuan if they buy a house. The scheme helped boost homes sales to more than 1000 over 4 days.

In Jiajiang county, the government is offering non-residents a subsidy of 100 yuan per sqm for new home purchases.

iFeng: 资阳首次买房政府奖励7000元 4天成交1000多套

And restructuring rolls on.


  1. The number of possible mothers in China to nearly halve over the next twenty years (with probability one, as they have all been born already) and our great hope is a baby formula lead recovery?