Very interesting – that iPhone sold in mainland China is dual physical SIM, and iPhone sold in the US is dual e-sim.
Not compatible at all.
In the US, iPhone 13 is the last model that has a physical tray, so that you can have a US +1 number (e-sim) and a Chinese +86 number (physical only) in the same device.
E-sim is not technically impossible in China. It’s just not available for smartphones. China Unicom does offer e-sim on some iPad models.
I came across this number today: 6.29 billion liter of Baijiu (a traditional Chinese liquor) was produced in 2023.
I am wondering how to make sense of this.
1 liter = ~0.9kg or 18 liang (两, a traditional Chinese measurement)
6.29 billion liter = 4.5 liter per person, or 81 liang
So if all produced were consumed, it’s 81 liang per person per year, or 1.5 liang per week.
If you assume children (250mn below 15) and many women don’t drink Baijiu that much, it could 3 liang per adult male per week.
It sounds like a pretty high number. One typically won’t drink 3 liang if eat at home. It’s usually for dinning out with business or other occasions.
Considering how occasions like this would decrease over time – younger generation might prefer a different life style, or businesses could be done without being drunk at dinners, it’s hard not to question about how much Baijiu China needs to consume each year.
I won’t be surprised if the volume can be down 1/3 or 1/2 from here in decades, assuming no export or store of value etc.
In the US, when the US gov borrows money, the treasury department will issue different debt securities with different maturity and interest rate.
When demand is low, and interest rate may shoot up. Meanwhile, the Fed may step in to buy treasuries in the open market, by crediting (increasing) reserve accounts banks hold at the Fed. Also Fed needs to pay interest for these reserve accounts, it doesn’t really matter that much – the loss Fed made can be earned in the future. In normal times, the Fed’s profit will go to the treasury department.
So everything looks like magic and money is just created from the air.
The only process that needs the public to participate is the US treasury auction and the Fed can’t buy directly.
In China, property looks just the same.
When a city gov borrows money, it will sell the use right of a land. If that’s for residential, then they will be held by homebuyers eventually. When demand is low and deficit is high, home price shall drop.
So developers are like the banks participate in US treasury auction. But who is the Fed in this case?
It’s interest that China has thought about the idea of buying back unsold homes.
In some cases, homes will be auctioned by banks if the homebuyers default. Anyways, there is excess supply on the market and demand is not strong.
The problem is this is not central gov’s deficits. Local gov doesn’t have a “Fed”. Maybe some local SOEs can act like Fed in this case to buy properties back?
But these local SOEs can’t just buy by creating “reserve accounts” at local banks.
Sure they must have good relations. So basically local banks need to lend to local SOEs and not to worry about these “reserve accounts”. Put it another way, banks need to swap the homes (treasuries) with local SOEs promises (reserve accounts).
You see, this has become very complicated and is not as smooth as printing money in the US.
Housing
US new home sales down 7.7% yoy in Apr; median prices were flattish and should be flattish going forward. May data will come in this week.
US existing home sales was down 1% yoy in May, although median price rose 5.8% yoy. Sellers love their low mortgage rate.
Rental market looks still warm. Median rental price needs to go down.
Food & beverages
McDonald’s $5 meal shall provide a relief.
Starbucks has the new $5 or $6 combo. For $5, you shall get a tall iced or hot coffee + a croissant. This price is similar to China already (32 rmb, or $4.4).
Gas price
Gas price is lower than or similar to 2023 level.
Looks to me that inflation pressure is very manageable.
Time for $TLT, $IWM, and biotech etc. to shine.
And check Truflation: 2% is not far away.
Over the weekend, Mideo Real Estate announced a spin-off for its property developer business (PD&S) as a private enterprise; minority shareholders can receive HKD 5.9 per share in cash for each share of HK.3990.
The listed co traded at HKD 3.75 per share last Friday. So the cash payout is 57% more than the share price. The remaining listed co will focus on property management etc.
Is this applicable to many other developers and thus putting a floor?
I doubt it.
3990 is relatively small and controlling shareholder has over 80%. The max cash payout needed is ~1.6bn HKD, or $205mn – this is a small amount and can bed easily handled
Midea Group (a major electrical appliance manufacturer in China) itself is strong and cash-generating, with 33.7 billion rmb profit in 2023. The founder, He Xiangjian, has ~29.6% ownership of Midea Group.
Midea Group is paying over 20bn rmb in cash dividend in 2023. He Xiangjian can get ~6bn rmb, more than enough for the 1.6bn HKD payment calculated in above.
Even there is a price, that’s around 0.33x p/b.
And when 3990 stock was trading at HKD 3.75 per share, it’s at around 0.2x p/b,
This is hilarious.
Yes.. we hate biotech this much.
Anyone who bought biotech during covid is just speculative lol.
As 5-year return is 24%, annualized return is just 4.4%!
Buy US treasury instead!
Disclaimer: The above is for fun and should not be taken seriously. It is intended as sarcasm.
Just a random thought..
西游记: this is easy – RPG game with many bosses battles. The essence of the book is a group of 4 ppl going the West with many monsters on the road.
三国演义: this is easy – SLG strategy game (turn-based), or RTS game. The book is about a period of Chinese ancient history when three kingdoms fight each other.
水浒传: this can be gacha game like Genshin Impact. The book has 108 characters, each has unique backgrounds and skills.
红楼梦: this one is hard. What makes this book unique is its detailed depiction of lifestyle during Qing Dynasty. Maybe it’s metaverse game, or story-based romance game.
These 4 famous books each has its own appeal to a wide range of audience, which can reflect certain underlying demands. And these books’ popularity is proven over time.
Game developers need to constantly think about what “needs” they are catering to. Any thing that is popular for a long time must have served some pain points well.
Search is a two side product.
You need to provide that “10 blue links” to serve consumers. Hopefully consumers can find what they need (have the answer) as fast as they can (no need to go to the next 10 search results).
You also need to serve the advertisers to market or grow their business.
Baidu seems to be challenged in both ways.
Sometimes, the most up-to-date information (with details) is found in Xiaohongshu and Douyin, where users upload tons of posts and videos. User-generated content can carry much more info than official news, as official news is well controlled by gov in China. There are basically not news other than official news.
For business owners, Baidu doesn’t offer much growth. Merchants shall spend more on e-commerce sites directly (which was mainly search-driven before recommendation rose). Douyin and Xiaohongshu may help “create the desire to buy” that search can’t. Some services can be banned from making advertisement (like after-school education). For some other businesses (toB etc.) – Moutai (liquor) is a more efficient sales spending. More importantly, search results are mostly webpages; but webpages are less useful in China vs. the US – a Weibo Account and a WeChat Public Account is more useful.
This actually leads to another interesting thing – I feel independent websites are dying in China. They are not important at all. Maybe China is preferring mobile over PC due to real name, and mobile phone number is the easiest way to fulfill that requirements, but websites don’t necessarily need a mobile phone number. This topic should be explored more.
If you look at US new home inventory, it shall take about 9 month to clear, as of Apr 2024 (see previous post).
What’s the number in China?
[The following numbers apply to 100 cities in China; source: https://mp.weixin.qq.com/s/BKnnF9QJTkYnAb1u0ip3Sw]
More than 2 years – 26.5 month to clear as of Apr 2024.
For lower tier cities (green line), the month to clear can be more than 30 months, or 2.5 years.
What’s would be the normalized rate of demand?
[Note the difference between 100 cities the the entire country]
Assuming future China has 7 million couples per year and new home demand is ~1/3 of that, it would be ~2.3mn new home demand.
Assuming new home is ~85 sqm, (2 x 42 sqm per person), it’s roughly 200mn sqm per year.
If every couple buys a new home, it would be ~600mn sqm.
There are other demand such as replacements. But just look at the US, which records less than 700k new home sales per year currently. China has 4x the population, so eventually new demand might come to 2.8mn, which translates to 280mn sqm if average is 100 mn per home.
This assumes new homes can sustain long enough.
There might be other renovation demand that can be recorded as new home sales, but real new demand could be lower than people think.
As of Apr 2024, reported inventory of new homes for 100 cities stood at ~500mn sqm.
In 2023, new home supply for 100 cities is ~291.1 mn sqm while sqm sold is ~316.5 mn.
In gov’s report, 2023 new residential sold was 948 mn sqm in 2023. So these 100 cities accounts for ~1/3 of total demand.
US Apr new home sales (seasonally adjusted) dropped 7.7% yoy, reported last month.
The drop was long overdue, as interest rate (thus mortgage rate) has been high for quite some time.
The yoy strength from Apr 2023 – Mar 2024 was due to
A) the base effect
As most of 2022 was pretty weak after the war in Ukraine broke out. Fed also started the rate hiking cycle in Mar 2022.
B) the amazing AI-driven tech rally
Nasdaq rose over 60% from end of Sep 2022 to end of Mar 2024.
It reached all-time-high so even if you invested at the peak of 2021, you will still make money.
I bet many people enjoyed the wealth effect from stocks.
The base for the next 6 month (May 2023 – Oct 2023) looks pretty high, so yoy comparison should look weak, which is good if Fed is looking for “weak data”.
Meanwhile, inventory (new home for sale) has reached ATH since Feb 2024.
Previous high was 466k, seen in Oct 2022.
Time to clear the inventory is climbing in recent months. Now (Apr 2024) it’s 9.1 month vs. an average of 9.8 month between Jun 2022 to Oct 2022.
The median price for new homes sold is quite stable since Fed increased interest rate.
