China’s Economy And Real Estate Market Have Yet To Bottom

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This article was originally published February 18, 2022, under Tri-Macro Research.

According to Bloomberg, in an internal document cited last week by the South China Morning Post, China Vanke’s CEO was quoted as saying the company was in a “life or death battle” and “On our last legs”. Vanke is one of the financially strongest and largest Chinese real estate developers. This is a sign those companies in unhealthier financial situations will likely end up in default. I feel this is especially true for those who owe a lot of offshore-USD-denominated debt but earn revenue in the yuan or RMB.

I’ve explained before my issues with China’s macroeconomic stability. In summary, China growth since 2000 was very robust. Much of this was due to the fact that Chinese monetary authorities embarked on massive infrastructure, construction and supply-side driven stimulus. This required huge amounts of credit into the…