MoM existing home price index declined by 0.7% for BJ, SH and SZ on average.
The yoy comparison worsens to -2% yoy.
Tag: China Observation
China version of German premium cars
It’s weird to me that the BMW 5 Series, Audi A6, and Benz E Series are priced much cheaper than their foreign original version.
The gap can be 1/3 – BMW 5 Series will cost ~$60k (maybe 8% dealer discount) vs slightly above $40k in China.
They don’t look exactly the same, but the China version will be even “longer” / “larger”.
This is weird again as I would assume bigger cars cost more – e.g. BMW 5 Series is bigger than BMW 3 Series.
I can only assume that the components used in China version are different from the original version, thus cost is lower.
But still, it’s hard to imagine a good things is priced lower in China vs abroad.
Typically, a “real good thing” can be priced higher in China due to large population base and thus is short in supply.
Update
China’s BMW 525Li is weaker than German BMW 520i.
Audi’s and Benz’s is similar performance across China and German.
Things are moving fast… within China’s financial system
Last year, Huarong, now China CITIC Financial Asset Management (2799.HK), bought into Bank of China H-share, becoming a over 3% shareholder. And it took one non-executive board seat of Bank of China right after.
Great Wall AMC, became a over 3% sharehoder of Minsheng Bank and got 1 non-executive board seat.
Xinda, via purchasing convertible bonds, became a over 3% sharehoder of Shanghai Pudong Development Bank.
These shouldn’t be taken lightly, as banks are heavily regulated in China. So there were political decisions made.
BYD hit a ceiling in China?
BYD domestic volume in May shows no growth yoy, despite overseas growth of 137% yoy.
YTD (Jan-May), BYD domestic volume has grown 27.5% yoy, but in May it’s flattish yoy at below 300k.
The big promotion in May is probably a reason – dealers might had been waiting for the discount, so that May volume is low.
Current consensus is for BYD to sell ~5.4mn cars in 2025, with overseas contributing 0.8mn and domestic sales reaches 4.6m (to grow near 20% yoy).
China overall passenger car market can grow actually, with cheaper models, large population (4x US!), and shorter holding period for each car (due to battery).
In 2024, U.S. new vehicle sales reached approximately 15.9 million units.
16mn x 4 is 64 million cars per year for China vs. ~22.6 mn passenger cars sold in 2024 in China.
The infrastructure is unlikely to support a sudden increase, but if it increases to 30mn pear year, 70% NEV -> 21mn, 30-33% m/s for BYD -> ~6-7mn is probably the ceiling of domestic volume for BYD.
HKD is USD or not?
HKD is pegged to USD. The fixed range is 1 USD = 7.75 – 7.85 HKD.
However, a weird thing is happening recently.
HIBOR (Hong Kong Interbank Offered Rate) is dropping dramatically.
For a USD-pegged currency, its borrowing rate normally increases or decreases with USD, and is similar to USD, otherwise arbitrage may happen.
Fed’s fund rate currently is 4.25% to 4.50%.
HIBOR 1-month dropped from 4% to below 1%. from May to Jun.
May 2nd, 1 Month HIBOR is 3.98363% vs. Jun 19th, it’s 0.53506%
A 350 bps drop in 1.5 month! Crazy world.
Three things may happen:
1/ Fed to decrease interest rate.
That will probably happen within the next 12month, but not in the July meeting.
Possible in Sep and/or Dec meeting.
2/ HK to limit money outflow.
It will become more like mainland.
But why?
HK doesn’t have the incentive to do this. And Beijing also wants a special international finance center.
Thus, unlikely.
However, there might be more mainland’s RMB converting into HKD – think about SOEs.
Since they are under the direction of Chinese gov, they won’t participate in every corner of the global capital market.
These HKD will behave like under the capital control.
3/ HKD-USD peg breaks
Too big a thing.
In short-term, seems unlikely.
In early May, HKMA needs to sell HKD and buy USD.
In early May, the exchange rate hit the strong-side CU of HK$7.75 to US$1 four times on three trading days, during both Hong Kong and non-Hong Kong trading hours. The HKMA sold HK$129.4 billion in exchange for US$16.7 billion in accordance with the LERS mechanism.
After Fed’s rate decision in June, HKMA expects carry trades may drive USD stronger against HKD and makes HIBOR higher.
If carry trades are to persist, the Hong Kong dollar exchange rate may weaken further, and may even trigger the weak-side Convertibility Undertaking. In such a case, the HKMA would then sell US dollars in exchange for Hong Kong dollars in accordance with the LERS, leading to a corresponding decline in the Aggregate Balance, hence driving Hong Kong dollar interbank rates to gradually increase.
Fourth year of decline in household’s new debt
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.
Notable decline in Baijiu stocks
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.
When we are saying China needs to boost household consumption
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.
Investing in China: news are not news
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
Existing home price index near flattish in Feb 2025 across tier-1 cities
In Feb 2025, the price index of existing home across BJ/SH/SZ averaged is only -1.4% yoy, about flattish.
As of Mar 2025 data, price index of existing home across BJ/SH/SZ averaged has improved for 6 consecutive month (Oct 2024 – Mar 2025), by about 0.44% every month.
The five month from Oct to Feb month has helped the yoy comparison improve 8.6% (from -10% to -1.4%).
