Implications of China’s New Land Auction System

The city of Changchun in northeastern China was the first to auction land under the new pilot auction system this month, and so far, local governments are disappointed. Developers have been restrained from aggressive purchases, and while a few pieces of land were bid higher, most parcels transacted at the starting price. Fierce fights are expected this week and in May and June when large cities release more land on the market. Transactions in smaller third-tier cities unaffected by the new auction system are slowing even relative to last year’s levels, with cities in southeastern China outperforming those in inland and northern China. These trends would suggest a sharper slowdown in property construction later in the year, compounding the pressure already facing smaller developers.

Posted May 5, 2021
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Property Market Chartbook, April 2021

China’s property industry reported strong yet moderating growth across most major indicators in Q1, flattered by comparisons to last year’s COVID outbreak. Sales are strong even relative to normal years despite tightening measures from both Beijing and local governments, risking more aggressive restrictions on purchases and developers’ financing. The land market remains weak in small cities unaffected by the new land auction system, suggesting weaker new starts and construction momentum ahead.

Posted May 5, 2021
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Q1 2021 China Macro Data Recap

China’s headline GDP growth surged to 18.3% y/y in comparison to last year’s COVID-related contraction, but sequential quarter-on-quarter momentum and industrial output slowed beyond market expectations. March credit growth disappointed and tipped the credit impulse into negative territory, suggesting weaker cyclical activity ahead in the second half of the year. Both retail sales and PPI growth were surprisingly strong in March, and the resilience of the export manufacturing sector remains a key area to watch in the coming months.

Posted April 20, 2021
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