2023-12-18 12:36:02
When Thomas Chow, 40, a financial man from Shanghai, looks back on 2023, he can’t help but think regarding his household finances. His stock investment was reduced by 30% and his salary package was cut by 30%. The value of investment properties has fallen by 20%.
“I feel like my heart is going to break. What is supporting me now is my desire to continue working to support my large family,” said Chow, who lost much of her life savings due to the slump in the real estate and stock markets. It will resonate with the hearts of the Chinese people.
About a year ago, China, the world’s second-largest economy, lifted its “zero coronavirus” policy to thoroughly contain the coronavirus and tried to regain economic momentum, but the economy has stalled. The threat of unemployment is also growing.
Middle-income earners are now under pressure to reconsider their priorities in household spending. Some people are withdrawing from investments or selling assets to create liquidity.
In Chinese society, where 70% of household assets are real estate, the meltdown in the housing market is putting significant pressure on household budgets. According to Bloomberg Economics (BE), for every 5% decline in housing prices, 19 trillion yuan (approximately 380 trillion yen) of housing equity is lost.
“This may be just the beginning of more wealth losses in the coming years,” said BE economist Eric Chu. “Unless there is a big bull market, small gains in financial wealth will not offset losses in housing wealth.” Deaf,” he said.
China’s official data shows a gradual decline in existing home prices, but real estate companies and private data providers say prime locations in big cities are down by at least 15%.
China’s housing sector currently accounts for regarding 20% of gross domestic product (GDP), but might shrink to regarding 16% of GDP by 2026, according to BE. This will put regarding 5 million people, or regarding 1% of the urban working population, at risk of losing their jobs or losing income.
If it sells, you’re welcome
Don’t be discouraged by financial investment. This month, Chinese stocks have underperformed by the sharpest rate compared to other emerging markets since at least 1998, and investment trust performance has also been sluggish. Yields on banks’ asset management products also remain subdued, and deposit rates have been cut three times in the past year.
In search of high returns, China’s wealthy have been purchasing financial products sold by loosely regulated shadow banks, but China’s $2.9 trillion (approximately 414 trillion yen) trust industry has Cracks are starting to appear, with the latest payments scandal potentially costing tens of billions of dollars.
According to the Global Wealth Report released in August by Swiss bank UBS, China’s net worth per adult will decline by 2.2% to $75,731 in 2022. Total wealth per adult fell for the first time since 2000 as non-financial assets declined in value due to the housing market downturn.
Ek Huang, 39, who works in the media industry, watched the value of the investment property she bought in Ningbo, Zhejiang province fall by regarding 1 million yuan from its peak in 2019. She now considers herself lucky to have sold in May of this year, before prices dropped further.
Mr. Huang gave more than half of the proceeds from the real estate sale to his parents as a retirement fund, and put the rest in demand deposits or money market funds (MMFs) that he might convert into cash at any time. I gave up on investing in stocks because the stocks I owned wiped out all of my profits since 2018.
“My employer is desperately trying to survive, and my salary may be cut or I may be fired.My goal is to have stable assets, and I want to have enough liquidity on hand,” he confessed.
Original title:China’s Real Estate Meltdown Is Battering Middle Class Wealth (excerpt)
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