Earlier today, Goldman's head of hedge fund sales Tony Pasquariello observed that "To this point in the sequence, I'd argue the slowdown in China had been a net positive for US equities - with specific regard to the disinflationary impulse and the flow of capital. That said, coming out of a week that featured another disappointing set of data - and another dose of CNH weakness - it now feels like China growth fears can provoke a more global risk-off dynamic."
Well, if Tony is right, then watch out below, because the bad news out of China has become a firehose that is only getting more powerful with every passing day, especially if one ignores the fake official data and looks at the truth beneath the surface.
New-home prices have slipped just 2.4% from a high in August 2021, government figures show, while those for existing homes have dropped 6%. Of course, China's official data is almost as credible as that of the Biden Department of Labor; and indeed, the picture emerging from property agents and private data providers is far more dire.
Even as of March, before the latest property market crisis, more than half of tier-2 and tier-3 cities saw existing-home prices fall more than 15% from peaks, Guolian Securities economists wrote in a report citing data by existing housing transaction services provider KE Holdings Inc. Actual declines from peaks could be sharper, as the agency only compiles data starting November 2018, the economists cautioned.
"Home-price data in many countries are based on total market transactions, yet China uses selective samples," said Chin, the head of research for Asia Pacific at CBRE Group Inc. "When a market goes down, the true market condition is hard to be reflected in such data."
China's statistics bureau has said in an online explanation that raw data on new-home prices is based on all sales and purchases registered in local housing transaction bodies.
What is worse is that even China's state-owned property developers are now warning of widespread losses, fueling concerns that the housing crisis is expanding from the private sector to companies with government backing.
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