Goldman Sachs on China, in brief from a video interview on CNBC, I've pulled out some points:
- consumption strength may be related to the singles day sales (November 11)
- remains to be seen whether this is a sustainable recovery in consumption
- the weakness in the property sector and also for investment outside of a property may be telling us all the headwinds in the property sector and local government financing vehicles are still strong
- policy makers cannot relax ... more work needs to be done
- a very important aspect of the Chinese economy right now in many parts of the economy ... we have a sort of self-fulfilling negative loop that's ongoing
- if property prices are falling ... is probably not the best time to buy ... a buyer will want to wait until prices bottom to buy property and if that happens then the property price may decline further so there is a self-fulfilling negative feedback loop at work
- how do we get out of that that's where we really need government policy, whether a clear road map how do we manage the property sector, how do we manage the growth slowdown ... expanding central government balance sheet to concretely show the market that this is the how we're going to address these issues ... that will get us out of that negative feedback loop because otherwise it can keep going
- and slow growth becomes a slower growth and I think that's something the policy makers would not want to see
- right now the property sector has two parts ... if we're talking about the old model that the develop developer buying land and pre-sales and the sort of the commodity housing we're used to for the past 20 years, I don't think much has changed and there's still a lot negative news to come out because if you think about starts are down 60% but the total new homes under construction is only down 13% ... at some point a total new home under construction should be consistent with the new starts and that should be a lot lower than where it is now ... so I think there's still more deceleration or decline to come
- but there's also this new part of a property sector the government is trying to leverage to smooth that slowdown this is the where public housing Urban Village renovation and the 1 trillion yuan reported PSL (supplementary lending) the central go government may provide that's where support is coming in
- we have to separate the two parts, if you think about the old model and the private developers I don't think we're out of the woods
