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Chart: Ranking of World Happiness Countries (2021-2023)

Source : Bloomberg

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Where People Are (Un)Happiest With Their Lives

China Pledges Government Funds for Equipment Upgrades

Tom Hancock wrote . . . . . . . . .

China pledged central government funds to encourage consumers and businesses to replace old goods and equipment, a pillar of its plan for economic growth of about 5% this year.

The action plan aims to increase spending on equipment in sectors such as industry, agriculture, transport, education and health care by at least 25% by 2027 compared with last year, the State Council said in a statement on Wednesday. It also intends to double the recovery of older cars and raise that of used home appliances by 30% during the period.

The program will get support from the central government budget alongside tax breaks and targeted lending from banks, the cabinet added. The statements didn’t specify the amount of government funding for the program, which was first mentioned by President Xi Jinping in February as a way of boosting demand for goods.

China’s 2024 growth target is seen as ambitious because the economy faces weak domestic demand caused by a housing slump and low confidence among businesses and consumers. Those forces are also leading to deflation, which is increasing tensions over China’s exports.

The plan should add 0.7 percentage points of growth each year until 2027, said Pantheon Macroeconomics’ Chief China Economist Duncan Wrigley. Most of the boost will come from support for car purchases, he said.

“The action plan includes incremental support each year up to 2027, putting a floor under domestic demand and providing space for industrial restructuring and resolving property sector issues without resorting to a big credit stimulus,” he added.

Officials are drafting rules and standards for rolling out the car replacement program, which could be launched in the second quarter, Chinese media outlet Cailian reported Thursday, citing sources in the industry whom it didn’t name.

China stocks fluctuated on Thursday, with the benchmark CSI 300 Index closing down 0.3%. The yuan traded onshore slipped 0.08% to 7.1927 versus the greenback.

Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc, said the equipment upgrade and consumer goods trade-in program may be the “closest we’ll get” in terms of direct stimulus targeting consumers. Addressing manufacturing overcapacity that has sparked growing tensions with trade partners may also be part of the considerations behind the initiative, he said.

“We are in an election year for a number of countries,” he said. “The competitive prices of Chinese products could indeed trigger more tensions with trading partners.”

“I believe policymakers also took into consideration the de-globalization trend, the investigations into some of China’s products and government subsidies,” Ding said.

In October, the European Union launched an inquiry into whether China was providing illegal financial support for the electric vehicle industry. Beijing later launched an anti-dumping investigation into brandy imported from the EU, a move seen as a retaliation against France, which supported the EV probe.

Further Spending

If China spends around 800 billion yuan ($111 billion) to provide a subsidy of 20% for purchases of upgraded cars, major home appliances and equipment, it could induce further spending of that amount this year, Goldman Sachs Group Inc. economists estimated in a recent report.

The State Council, which co-ordinates China’s government ministries, said equipment upgrades would focus on industrial equipment and items such as residential elevators. Consumer goods trade-ins will target home decoration products besides appliances, it said.

China’s state planning agency, the National Development and Reform Commission, said that it would work with relevant authorities to increase “fiscal, financial, taxation, and other policy support” for the equipment plan, without giving an amount for the support.

Meanwhile, an economist who advises the government said China needs to boost domestic demand and adjust its industrial policy to counter rising criticism from the US and Europe.

“We should pay serious attention and recognize that this could be an important development in geopolitics,” Huang Yiping, dean of the National School of Development at Peking University, said during an online forum before the action plan was published.

“A widespread protectionist wave against Chinese products would be bad for China’s future development and innovation,” he said.

Source : Yahoo!

Chart: Russia Diverts Oil Exports to India and China

Source : Statista

Hong Kong’s Apartment Glut Is Set to Keep Prices Down After Tax Cut

Shawna Kwan wrote . . . . . . . . .

Hong Kong’s home sales have roared back to life since the government scrapped extra property taxes last month. A supply glut means a rebound in prices is likely to take much longer.

While property transactions have jumped sharply in the past two weeks, there is little evidence that values are rising, according to property agents and analysts. The abundance of apartments for sale, together with high borrowing costs and a weak economy, is expected to stunt price growth in the coming months.

Developers are focused on clearing their inventory for now and won’t price homes higher than the market level, according to Sammy Po, chief executive officer of the home division at Midland Realty. For example, the first batch of apartments from Henderson Land Development Co.’s Belgravia Place were priced at a discount and the developer only lifted them in subsequent batches by single digits, despite an overwhelming response.

“There is a lot of inventory in the market,” said Po. “If prices are raised too high, buyers will just go for other projects.” Po doesn’t expect Henderson to hike prices significantly for the remaining units.

A lackluster property market in the past year has led to the accumulation of unsold homes. Residential units available in the primary market rose 6% to 91,300 in the fourth quarter of 2023 from three months earlier, according to Jones Lang LaSalle. By comparison, only 13,000 new homes were sold on average annually from 2021 to 2023, government data show.

“For 2024, we will have a very good figure in terms of transaction volume, but in terms of the pricing, we have to still face negative growth because of the competition in the market,” said Hannah Jeong, head of valuation and advisory services in Hong Kong at Colliers International Group Inc. Jeong expects prices to rise in the fourth quarter after the market absorbs some of the inventory.

Hong Kong’s biggest developers are lining up their project launches to take advantage of the improved sentiment to offload units. CK Asset Holdings Ltd. started to promote its Blue Coast development comprising more than 600 units in recent days.

The second-hand market is in a similar situation. Since the curbs were lifted, transaction volumes have been rising and room for sellers to offer discounts has shrunk to 1% to 2% from 5% to 10%, said Po. But he doesn’t expect prices to go higher than the current level because there are still a lot of homes for sale. If the seller raises the price, the buyer can simply turn to the many other homes available in the market, according to Po.

Hong Kong scrapped extra taxes on foreign buyers and existing-home owners in late February and removed the special duty on sellers who offload their properties within two years of purchase. The latter will lead to more secondary units becoming available for sale, with more than 80,000 no longer subject to the tax penalty, according to Bloomberg Intelligence.

There are more than 41,000 listings on the website of Centaline Property Agency Ltd., Hong Kong’s biggest realtor. Average transaction numbers for secondary homes stood at about 41,000 each year for the past three years.

Secondary home prices in the week ended March 3, which included four days after the lifting of the curbs on Feb. 28, fell 0.8% from a week earlier, Centaline data show. So far, prices are down 2% since the beginning of the year.

UBS Group AG expects home values to decline 5% this year after the tax policy change, versus its previous forecast for a 5% to 10% drop.

Still, the rate of absorption is likely to be faster than previous years as more people snap up multiple homes after the policy change. A buyer purchased all 24 units available for sale in Belgravia Place on Monday for HK$166 million ($21 million), Hong Kong Economic Times reported.

There are cases of investors buying homes in bulk recently, said Jeong from Colliers. The possibility of speculation is a concern for the city, but for now, “the priority is to bring up the economy first,” she said.

Source : BNN Bloomberg