China’s Deepening Housing Problems Spook Investors
Stocks in Hong Kong and mainland China drop after developer Country Garden flags more debt problems
3 min
China’s latest property crisis is threatening to spill over into the broader economy, worrying investors and causing a broad market selloff.
Chinese stocks fell in Hong Kong and mainland China on Monday, with real-estate developers, electric-vehicle manufacturers and other companies in economically sensitive sectors declining the most. The Hang Seng Index, which is loaded with Chinese companies, dropped 1.6%, taking its year-to-date loss to 5.1%. China’s CSI 300 of large-cap stocks fell 0.73%, and is also in the red for 2023.
The financial struggles of Country Garden Holdings, China’s top surviving privately run developer, have been front-and-centre since it missed interest payments on two U.S. dollar bonds a week ago. The property giant said over the weekend that trading in 11 of its yuan-denominated domestic bonds has been suspended, and that it intends to discuss repayment plans with investors. Country Garden’s Hong Kong-listed shares, which had been relegated to penny-stock status last week, fell another 18%on Monday.
China’s property sector has gone from being a major contributor to the country’s overall growth to a drag on its economy. New home sales increased in the first few months of 2023, providing a glimmer of hope that the worst of the housing downturn was over. The market turned in April, and nationwide sales at China’s top developers have slumped since. Country Garden’s latest problems are likely to turn off potential home buyers, further delaying a housing recovery.
Data released last week showed that China was slipping into deflation. Households, which have racked up high levels of savings, are also borrowing less.
Chinese banks extended the equivalent of $47.8 billion in new loans in July, down nearly half from the same month a year ago. It was also the lowest monthly total in more than a decade, according to data provider Wind. The July figures reflected slightly higher corporate lending and a drop in lending to households.
The loan data was “a big letdown,” as it reflected a lack of demand for borrowing, said May Ling Wee, a Chinese equities portfolio manager at Janus Henderson Investors. “Animal spirits are very low in China, and the government may need to do some pump-priming,” said Wee.
China’s economic troubles are also weighing on its currency. The offshore yuan depreciated past 7.28 to the U.S. dollar on Monday, and is close to its weakest level this year.
The country is scheduled to release a barrage of economic data on Tuesday, including monthly updates for real-estate investment, factory output and retail sales.
Problems are also cropping up in other financial-asset classes in China. Three publicly listed companies said in recent days that they didn’t receive payments they were promised on wealth-management products sold by Zhongrong International Trust, which is part of Zhongzhi Enterprise Group, a large domestic Chinese conglomerate. The missed payments are making investors worried about China’s sprawling trust industry, which has been a source of funding for property developers in the past.
Country Garden admitted to having liquidity problems last week and said it expects to post a big first-half loss. A default by the 31-year-old developer could have a bigger impact on China’s economy than the slow-motion fallout from China Evergrande Group’s debt crisis that began in 2021, some economists predict.
The company withstood the earlier slump that took down Evergrande and Sunac China, which together with Country Garden had been China’s three biggest privately run developers. “Country Garden’s default would mean a complete reshuffle and reorganisation of China’s real-estate industry,” said Wang Shengzu, global head of asset management at Haitong International.
When Evergrande defaulted on its international debt, China’s economy was in much better shape. The country was enjoying a boom in exports, and global investors widely believed that growth and domestic demand were being suppressed by its strict Covid-19 pandemic restrictions. China has since lifted those restrictions, but its economy has sputtered.
Before the downturn, Country Garden’s annual contracted sales were close to that of Evergrande’s by total value, but the former’s larger presence in China’s less prosperous cities meant it sold more homes at cheaper prices.
Country Garden also has a lot of unfinished property projects, as it was common for Chinese developers to sell partially built homes along with commitments to complete them in a few years. The company’s contract liabilities, a proxy for its unfinished projects, totalled the equivalent of $92.3 billion at the end of 2022, according to Country Garden’s last financial report.
The property sector is at a critical juncture, said Larry Hu, chief China economist at Macquarie Group. Plunging sales are a result of weak consumer confidence, and it is going to be hard for non-state-owned developers to survive in the absence of government help, he added. “Policy is the only game in town,” he said, referring to expectations that Chinese authorities will act to stop the market’s continued slide.
Shares of China’s homegrown electric-vehicle manufacturers dropped Monday, after Elon Musk’s Tesla cut prices in the country for two versions of its top-end Model Y car. Domestic rival BYD declined 6.1% in Hong Kong, while Nio, XPeng and Li Auto fell 2% to 3%.
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4 min
It’s go time for the highest-stakes mission at NASA in more than 50 years.
On April 1, the agency is set to launch four astronauts around the moon, the deepest human spaceflight since the final Apollo lunar landing in 1972.
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National Aeronautics and Space Administration teams have been preparing the vehicles to depart from Florida’s Kennedy Space Center on the planned roughly 10-day trip. Crew members have trained for years for this moment.
Reid Wiseman, the NASA astronaut serving as mission commander, said he doesn’t fear taking the voyage. A widower, he does worry at times about what he is putting his daughters through.
“I could have a very comfortable life for them,” Wiseman said in an interview last September.
“But I’m also a human, and I see the spirit in their eyes that is burning in my soul too. And so we’ve just got to never stop going.”
Wiseman’s crewmates on Artemis II are NASA’s Victor Glover and Christina Koch, as well as Canadian Space Agency astronaut Jeremy Hansen.
What are the goals for Artemis II?
The biggest one: Safely fly the crew on vehicles that have never carried astronauts before.
The towering Space Launch System rocket has the job of lofting a vehicle called Orion into space and on its way to the moon.
Orion is designed to carry the crew around the moon and back. Myriad systems on the ship—life support, communications, navigation—will be tested with the astronauts on board.
SLS and Orion don’t have much flight experience. The vehicles last flew in 2022, when the agency completed its uncrewed Artemis I mission .
How is the mission expected to unfold?
Artemis II will begin when SLS takes off from a launchpad in Florida with Orion stacked on top of it.
The so-called upper stage of SLS will later separate from the main part of the rocket with Orion attached, and use its engine to set up the latter vehicle for a push to the moon.
After Orion separates from the upper stage, it will conduct what is called a translunar injection—the engine firing that commits Orion to soaring out to the moon. It will fly to the moon over the course of a few days and travel around its far side.
Orion will face a tough return home after speeding through space. As it hits Earth’s atmosphere, Orion will be flying at 25,000 miles an hour and face temperatures of 5,000 degrees as it slows down. The capsule is designed to land under parachutes in the Pacific Ocean, not far from San Diego.
Is it possible Artemis II will be delayed?
Yes.
For safety reasons, the agency won’t launch if certain tough weather conditions roll through the Cape Canaveral, Fla., area. Delays caused by technical problems are possible, too. NASA has other dates identified for the mission if it doesn’t begin April 1.
Who are the astronauts flying on Artemis II?
The crew will be led by Wiseman, a retired Navy pilot who completed military deployments before joining NASA’s astronaut corps. He traveled to the International Space Station in 2014.
Two other astronauts will represent NASA during the mission: Glover, an experienced Navy pilot, and Koch, who began her career as an electrical engineer for the agency and once spent a year at a research station in the South Pole. Both have traveled to the space station before.
Hansen is a military pilot who joined Canada’s astronaut corps in 2009. He will be making his first trip to space.
Koch’s participation in Artemis II will mark the first time a woman has flown beyond orbits near Earth. Glover and Hansen will be the first African-American and non-American astronauts, respectively, to do the same.
What will the astronauts do during the flight?
The astronauts will evaluate how Orion flies, practice emergency procedures and capture images of the far side of the moon for scientific and exploration purposes (they may become the first humans to see parts of the far side of the lunar surface). Health-tracking projects of the astronauts are designed to inform future missions.
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There is a custom-made warmer for meals, with beef brisket and veggie quiche on the menu.
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The Universal Waste Management System—that’s the toilet—uses air flow to pull fluid and solid waste away into containers.
What happens after Artemis II?
Assuming it goes well, NASA will march on to Artemis III, scheduled for next year. During that operation, NASA plans to launch Orion with crew members on board and have the ship practice docking with lunar-lander vehicles that Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin have been developing. The rendezvous operations will occur relatively close to Earth.
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