Charting this…
From Jan to May, China’s household added 834.7 billion mid-to-long-term rmb debt.
This is only ~30% of 2021 level (near 3tn), and 40% of 2016 level (2tn rmb). This is the 4th year of decline of newly added debt; it’s only 3% below 2024 level though.
For the full year of 2016 and 2021, China’s household added 5.7 trillion and 6.1 trillion mid-to-long-term rmb debt.
Household’s mid-to-long-term debt is mostly for home buying.
See my previous posts on Baijiu here (Jun 2024) and here (Sep 2024) – concerns on volume growth and the ability to further increase profitability.
While premium Baijiu company like Moutai can still do ok, as key product’s market price is still higher than its ex-factory price, the price gap is narrowing, which means Moutai’s distributors are having a bad time.
The end demand is additionally weak after Chinese gov’s recent liquor ban.
Moutai’s stock price has declined by ~15% since mid-May (1645 -> 1401). Currently, Jun 16 is one of the lowest closing price in 2025, worse than Apr 7 when tariff hit.
However, this represent a buying opportunity I believe.
Besides Moutai, other Baijiu brands stock also declined. Wuliangye has declined about 15% from its peak this year. In fact, it’s more than 10% lower than end of 2019 level (~rmb 133 per share)!
Luzhou Laojiao has declined about 25% from its peak this year.
They are trading at 20x (5% earnings yield, Moutai) and 14x (7% earnings yield, Wuliangye), and 12x (8% earnings yield, Laojiao) LTM earnings, compared with ~1.6% China’s gov bond yield.
Following the previous near flattish China’s real estate price in February 2025, China is seeing weakening in Apr and May, despite the yoy comparison still looks okay.
Key cities’ MoM existing home price index % change was -0.3% and -0.7% in Apr and May 2025.
The yoy comparison shows decline of less than 2% – existing home price index is only down 1.8% and down 1.3% in Apr and May 2025.
I have worked in both industries, venture capital and hedge fund.
I found that sometimes they can be exactly the opposite in how to make money.
While in venture capital, the deals that are more successful are those that are consensus. Capital pile in, and those with capital runs faster, adding to the moat.
While in hedge fund, the stocks that work better are those that are considered un-investable. When other holders cut loss / exit, it creates better risk reward profile and the perfect buying opportunity.
First of all, how large is the gap?
China’s household consumption is 39% of GDP, which is lower than EU average of 52%, 70% in the US, and below world’s average.
That’s about $2.3 trillion (13% x $17.8 trillion 2023 GDP).
Secondly, where are the areas to increase?
If look at GDP composition, China needs to increase in real estate services, healthcare, education, professional & technical services, information & communication, recreation & art, etc.
For real estate services, rent & management fees need to increase…
Healthcare and education is partially public spending. So need more gov budget allocation.
Services is essentially a problem of oversupply right now. Either needs to export or needs to increase demand.
Information & communication.. need to raise software prices.
Recreation & art needs more leisure time.
In China, owners’ imputed rent at market rate was only adopted as of 2023 GDP figure – 2023 GDP upward, among which CNY 1.343 trillion (~1% of GDP) is due to market rent approach vs cost approach.
Some public/government sponsored consumption are not counted as household consumption, such as public schools, healthcare etc. Therefore the split will make household % lower, but this won’t change total GDP figure. These are both valued on cost basis in China and EU.
If you hear a piece of “news” from China’s mainstream media, that’s not the news anymore. Normally, this “news” can be seen from multiple official outlets in China in similar or even the same words.
Therefore, you can trade on the news anyway; you should assume market has already priced this information.
The reason is that nowadays information transmits super efficiently in China, so little people would be left behind without the exposure to those mainstream “news”. Thus, there is no one you can have information edge over, especially in the market.
Then where/how to get information edge?
1/ by double checking the news with resourceful people. Context will matter a lot and they can help you understand for example whether a change is big / serious or superficial / repetitive.
2/ read the full documents; gather any information that is shortened or simplified in the news
3/ focus on news that is not repeated in other mainstream medias
4/ compare with previously similar events – look for anything that is more or less than before; in other words, result is not important, the difference matters.
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See others posts
AI revolution leads computation evolve from CPU to GPU, or from generalized to specialized.
Humanoid robots is exactly the opposite – they are going from single task to multi-tasks, or from specialized to generalized.
New home sales is ~60% of China’s home transaction, according to sqft from official stat. (Source: 全年新建商品房销售面积97385万平方米。二手房交易网签面积71812万平方米)
In the US, in 2024, ~700k new home sales vs. 4mn existing home sales. New home sales is ~15% of US home transactions.
60% vs 15%