On March 14, 2024, China posted an extended decline in home prices. At a 0.3% month-on-month decline, this is the eighth straight drop. Prices are down by 1.4% Y/Y.
The price change sounds small yet this is the biggest drop in 13 months. This has serious repercussions for the global economy. The Chinese have most of their savings in homes. As of the end of June 2023, total household deposits in banks were 132.2 trillion yuan. As real estate weakens, so does the health of their banks.
Markets reacted swiftly. Alibaba (BABA) reversed its rebound, falling from above $77 to close at $73.42 last week. Baidu (BIDU) pulled back to $103.86. New Oriental Education (EDU), however, sustained its uptrend. The firm pivoted out of online education and into video content.
DiDi Global (DIDIY), which was delisted from the U.S. exchange is steady at around $3.85. U.S. investors are suing the firm over its initial public offering.
Trade Restrictions
Worsening trade restrictions imposed by the U.S. on chip exports to China is a major headwind. In response, China is reportedly asking its EV makers to use domestic chips. The EV industry is already struggling. Nio and XPeng are unprofitable, losing more money as unit sales rise. Only Li Auto (LI) and BYD Company are worth considering. BYD recently announced that it produced more vehicles than Tesla (TSLA).
