TAIPEI (Taiwan News) – In response to the mounting tensions and ongoing trade war with the U.S., Beijing has reportedly begun restricting private Chinese investment into overseas real estate, in a move that is ostensibly being made to stabilize the exchange rate of the yuan, which is reportedly facing increased risk of depreciation.
Liberty Times reports that there may also be a large sell-off of U.S. property owned by Chinese companies on the horizon, which would be in tune with the widespread deleveraging being witnessed among Chinese financial institutions over the past few weeks.
According to the Wall Street Journal, the Real Capital Analytics firm has noted that 2018 is the first time in 10 years that Chinese companies have sold more real estate assets in a single quarter (US$1.29 billion) than they have purchased (US$126.2 million).
Some see this as a strategy to at once deleverage assets and potentially cause trouble for the U.S. real estate market. The Wall Street Journal suggests that the Chinese government is currently pressuring companies reduce their debt levels in order to lower potential risks in the event of a credit shock, which some are speculating may be approaching.
In late June a document intended for circulation among a financial think tank in China was leaked to the press that said China was “very likely to see financial panic” and that the government should be prepared to shore up banks, industries, and be prepared for possible social unrest.
Some observers suggest that China’s financial difficulties have been mounting for some time because the government has been engaged in servicing a “shadow debt” whose dimensions are mostly unknown, potentially even to the Chinese government.
The U.S.-China trade war is considered by some to simply be an exacerbating factor for Beijing. However government spokespersons continue to speak in optimistic language with regards to the ongoing trade conflict.
The spokesman for China’s Ministry of Industry and Information Technology, Huang Libin (黃利斌) on July 24 made a statement that despite some U.S. client companies canceling orders with Chinese manufacturers, the total manufacturing output of China’s economy from U.S. invested or joint venture companies only accounts for about 10 percent of the total industrial output.
Therefore losing orders from U.S. partners will not cause a huge disruption for projections of China’s overall industrial development, said Huang, as quoted by Liberty Times.
However, Huang did suggest that as the conflict continues China’s coastal provinces that are heavily invested in machinery and the electronics industry are likely to suffer from possible exclusion for the U.S. market, however at the current time there has not been any extreme impact for most industries.
He expressed optimism that the tariffs would ultimately do little to offset China’s industrial growth in the long term regardless if the tariffs are increased to target “US$50 billion or “US$200 billion” worth of Chinese products.
However, other economists doubt that China can actually maintain its pace of industrial growth with increasing pressure from Washington and, if some reports are correct, a financial “panic” that may be brewing. They advise that a quick surrender and early concessions from Beijing will provide the most beneficial outcome for all parties involved.