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%).
Read some interesting discussion on railroad build-outs in early 20th century in China, and its impact on cities.
Before railroads expanded, China’s economy relied a lot of waterways / canals.
Railroads changed the trajectory of cities. Traditional waterborne centers were sidelined and small towns can quickly become new centers, for example,
津浦铁路: Linqing fell; Dezhou rose
京汉铁路: Kaifeng fell; Zhengzhou rose
Additionally, if two railways are built with different standard, they shall create a city, for example,
Shijiazhuang: Zhengtai Railway (metre gauge) intersecting Jinghan line (standard gauge)
Changchun: Chinese Eastern Railway (broad gauge) intersecting South Manchuria Railway (standard gauge).
Overall retail sales dropped 3.3% yoy in the first quarter of 2025 in Beijing, with March dropping 10% yoy.
Auto contributed nearly 2% of the drop (-20% x 10%).
Meanwhile, average spending looks okay – it’s rising 2.3% yoy. It’s a very good number for Beijing actually.
It might be due to the parallel export (?) – people bought cars and export (e.g. Russia).
The unofficial “Mar-a-Lago Accord” raised this issue – that USD as a reserve currency bears additional burden.
Countries bought US Treasury to facilitate trade with another nation (not necessarily the US), thus creating an inelastic demand and causing USD to appreciate.
This appreciation shall weaken US export, especially in the manufacturing sector.
Such phenomena reflect what can be described as a “Triffin world,” after Belgian economist Robert Triffin..
However, when the reserve country is smaller relative to the rest of the world—say, because global growth exceeds the reserve country’s growth for a long period of time—tensions build and the distance between the Triffin equilibrium and the trade equilibrium can be quite large.
Source: A User’s Guide to Restructuring the Global Trading System
Another interesting point from the artcle.
..value-added taxes are a form of tariffs because they exempt exported goods but tax imported goods.
Despite that the US trade deficit is at the center of debate, US enjoys trade surplus in service!
What are service exports? IP, travel, financial services etc.
Source: WSJ
There is almost $300bn service surplus in 2024.
Bond market is volatile these days – US 10-years treasury yield just swung from under 4% to near 4.5% in a few days.
The inflation protected 10-year TIPS yield also rose from under 1.8% to over 2.2% in a few days. (this is like a 20% move? even higher than the 10% move in 10-year treasury).
I shall discuss 10-year TIPS more below.
It was ~5% in early 2000s. Then, it went down a bit before GFC. Between GFC and 2021, it was sub-2%. Now it’s back to pre-GFC level.
| Period | 10Y TIPS Real Yield | Key Characteristics |
|---|---|---|
| Pre-2008 | 2%–3%+ | Higher real rates, less Fed intervention |
| 2009–2021 | <2%, often negative | QE, ZIRP, low inflation, high demand for safe assets |
| Post-2022 | >2% again | Inflation shock, Fed tightening, rate normalization |
Source: ChatGPT
And in terms of why 10-year TIPS was low from 2009 to 2021, it seems that Fed QE is a big factor.
| Period | TIPS Purchase Status | Notes |
|---|---|---|
| 2010 (QE2) | ✅ Began buying TIPS | First inclusion of TIPS in QE |
| 2010–2021 | ✅ Continued buying in QE3, COVID QE | Purchases scaled with overall Treasury buying |
| Nov 2021 | 🔻 Began tapering all Treasury purchases | Including TIPS |
| Mar 2022 | ❌ Fully stopped purchasing TIPS (and other Treasuries) | QE ended completely |
| Jun 2022 onward | 🔄 Began Quantitative Tightening (QT) | Letting TIPS holdings roll off gradually |
Source: ChatGPT
As to whether yield will go up from here? The equilibrium real interest rates (r*) depend on several things:
1/ real productivity growth. AI is helping? So can push r* higher.
2/ global saving. Can be lower in China, thus less supply of capital. So can push r* higher.
3/ risk appetite. Going down sharply. So should push r* lower.
4/ DOGE. Lower gov spending should push r* lower.
5/ Reshoring. Need to borrow more. So can push r* higher.
Unfortunately, these factors are all moving..
Cooling off the excessive confidence
If the economy is running too hot, you need to cool it off.
One way to cool it off is to add uncertainties.
Individuals and businesses will pause new investments and rethink how fast they shall run when uncertainty (not short-term, or can be overlooked) skyrockets.
Perfect excuse to change gears
Sometimes, business leaders also need a good external excuse to press the “pause” button. Why?
Normally, they want to be seen as the encouraging voice internally. That what business leaders do – to grow the companies. And they always want suppliers to increase their capacity. Thus, showing extra confidence in business can ensure suppliers are confident enough.
To be seen as credible in the long-term, business leaders can’t change the tone overnight. And it’s hard to change the tone if there is no external shock. Otherwise, it feels like you were trying to “trick” your suppliers or employees.
Suddenly, tariff becomes this perfect excuse – external, lingering, impactful.
It’s just the perfect time to take a step back and rethink business leaders. And it’s the perfect opportunity to change gears.
Found another closing discrepancy in reported numbers.
These were the reported numbers for fixed asset investments (excl. rural) between 2020 and 2024.
The 2023 number has the biggest difference. If you directly compare 503,036 and 572,138, that’s dropping -12% yoy. Yet, the reported yoy was +3%.
This resulted in a 15% gap in yoy percentage number for 2023.
That gap has been shrinking to less than 1% in 2024, with +3.2% reported for 2024 fixed investments, compared with +2.3% in calculated comparison.
In 2024, the investment in the water conservancy management industry increased by 41.7%, investment in the air transportation industry increased by 20.7%, and investment in the railway transportation industry increased by 13.5%.
Those are some big % numbers. If you compare some headline numbers, e.g. water conservancy, the growth should be 13%, rather than 42%.
Maybe 2023 was indeed a lower base than reported.
Anyways, the picture in 2024 indeed looks better.
One thing is certain – US is trying to fight its trade deficits.
Who would be relatively safe from Trump’s tariff threat?
Countries that US runs a trade surplus!
Any examples? Brazil.
If a company wants to relocate its production, Brazil would be a top destination due to the trade surplus US enjoys, which means tariff threat is lower.
Plus, Brail has a big population with a relatively lower labor costs vs other countries like Australia, UK, or Singapore (US runs a trade surplus to those countries as well).
If you look at 2023 vs 2022 export data, you will find China’s export to Russia surged by almost 50% in USD terms.
Meanwhile, EU and US bought less from China in 2023 vs 2022 – China’s export to EU and US dropped by double digit.
In 2024, that trend is gone.
In USD terms, China’s export to Russia, US, and EU all rose by 3-5% in 2024 vs 2023.