January 1, 2025 • 11 mins
China's land market continues its painful decline, Taiwan tensions, & China's high-speed rail.
China Update provides listeners with the most up to date political, economic, and geostrategic analysis on China - so that you are on top of the world's number 2 economy.
These podcasts are based on hundreds of articles, think tank reports, government statements and other resources in English and Chinese every week. The views and analysis are all my own and I produce the podcasts.
My Patreon: https://www.patreon.com/chinaupdate
Disclaimer: China Update is not a financial advisory channel. While I take great care in researching everything discussed in these podcasts, nothing I say should be taken as investment advice. Please speak to a professional before making any investment decisions. #China
China Update provides listeners with the most up to date political, economic, and geostrategic analysis on China - so that you are on top of the world's number 2 economy.
These podcasts are based on hundreds of articles, think tank reports, government statements and other resources in English and Chinese every week. The views and analysis are all my own and I produce the podcasts.
My Patreon: https://www.patreon.com/chinaupdate
Disclaimer: China Update is not a financial advisory channel. While I take great care in researching everything discussed in these podcasts, nothing I say should be taken as investment advice. Please speak to a professional before making any investment decisions. #China
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to another episode of China Update, where it provides
you with the most up to date, political, economic, and
due strategic analysis on the world's number two economy. My
name is Tony. Happy Wednesday and happy New Year. Let's
jump in. First up, we start with the Chinese economy.
Land sales across China have experienced a significant downturn, dropping
(00:20):
by nearly twenty percent in twenty twenty four, marking the
lowest levels in years and highlighting ongoing difficulties in the
nation's property sector. According to data from China Index Academy
published on Monday of this week, just a few days
before the new year, land sales into three hundred cities
total just one point three eight billion square meters, a
sixteen percent year on year decline. Other institutions, such as
(00:44):
the China Real Estate Information Corps, estimate the fall to
be around seventeen percent, with total land sales expected to
reach approximately one point one billion square meters by the
end of the year. This sharp decrease contrasts with the
pre twenty twenty one period, when annual land transact actions
consistently surpassed two billion square meters, fueled by a thriving
(01:04):
property market. However, since the third quarter of twenty twenty one,
a liquidity crisis and falling property sales have forced developers
to reduce investments and land acquisitions and a bid to survive.
As a result, land transactions, that is, land use transactions
across the country have collapsed. While there were occasional uptecks,
such as in Uhan, where December sales surged to forty
(01:25):
one point eight billion YAN, the broader trend remains bleak.
Local government backed investment vehicles have been among the primary buyers,
often at premium prices. Despite some signs of revival in
the latter half of twenty twenty four, such as stabilizing
new home prices, many regions have seen revenues from land
sales falled by thirty to fifty percent, with developers cautious
(01:48):
about new projects due to sluggish sales. CRIC data reveals
that in thirty major cities, only forty seven percent of
residential land purchased from twenty twenty three to mid twenty
twenty four has been construction. The situation underscores the ongoing
challenge in China's real estate market and the uncertain roadorhead
for developers. Meanwhile, According to new official data from the
Ministry of Finance, local government revenue from land sales amounted
(02:11):
to three point three trillion YAN in twenty twenty four,
down twenty two point four percent from the previous year,
and that's officially. Unofficially, it's likely much worse, putting acute
pressure on many local governments and their fiscal health, as
we covered in yesterday's video as well, a December report
from Goldman Sachs found that new home starts and government
revenue from land sales have plunged by almost seventy percent
(02:35):
from their peak in twenty twenty one. That is worth repeating.
Land sales revenue, or land use sales revenue, represents a
major extra budgetary source of revenue for local governments. Since
its peak in twenty twenty one, government revenue from this
source has declined seventy percent. We also note that over
(02:57):
fifty percent of land use rights were purchased by state
directed firms, including local government financing vehicles. That is, state
money being used to keep land prices up so that
the state has the extra revenue. This is incredibly risky.
Local governments are essentially borrowing so that their government vehicles
have the cash to purchase land so that they have
(03:18):
access to this extra budgetary source of revenue to meet
fiscal obligations. If China's slow down is structural, then when
it comes to this land market fiscal income growth matrix,
then this fiscal mechanism is at its end. It is
at the end for China. The fiscal system is broken
and will need to be fixed before it is too late.
(03:41):
Next up, Taiwanese President William Leitzender has pledged to continue
increasing the island's defense budget and military capabilities as Beijing
intensifies military drills near Taiwan, signaling its willingness to use
force to assert control over the South ruled island. Speaking
during his New Year address today, Lie stressed the importance
(04:02):
of being quote prepared for danger in times of peace
in quote, and vowed to demonstrate Taiwan's unwaiving determination to
defend itself. Since Li's inauguration in May twenty twenty four,
China has ramped up pressure on Taiwan, conducting two large
scale military exercises encircling the island. The most recent drills
followed Li's December trip to the United States territories of
(04:22):
Hawaii and Guam. Which prompted Beijing to launch what Taipei
called its largest naval deployment in years. These exercises have
showcased China's growing military presence and its capability to encircle Taiwan,
underscoring Beijing's long standing objective to bring the island under
its control by force if necessary. Li's calls for enhanced
(04:43):
defense spending come amid growing concerns over Taiwan's security. This
uncertainty is compounded by Taiwan's political challenges at home. Li's
ruling party does not hold a majority in the legislature,
where opposition lawmakers are pushing for a budget overhaul that
could reduce defense spending by twenty eight percent. The challenges,
Taiwan has committed to a record military budget for twenty
(05:03):
twenty five, although political turbulence could jeopardize these plans. In
response to the evolving threats, Taiwan is increasing its focus
on modern warfare technologies. The island has signed agreements with
the US Company's Aero Verronements and Underill Industries to purchase
up to one thousand detact rones, which are becoming a
critical component encountering potential Chinese aggression. Drone development has also
(05:27):
become a key aspect of Taiwan's broader defense strategy, particularly
as China has employed drones for surveillance around Taiwan in
recent years. Meanwhile, Taiwan's defense plans are not limited to
military matters. Lai has also voiced concerns over China's impact
on global trade, particularly its practice of so called low
priced dumping of goods, which he believes all harm global markets.
(05:49):
As part of a broader international effort, the US and
EU have imposed tariffs on a range of Chinese products
to protect domestic industries. We have covered all of this
in the past, which as a significant trade surplus with
the US, could be caught in the cross fire of
this trade conflict, potentially facing new tariffs under Trump's administration.
With cross straight tensions remaining high, Taiwan's commitment to strengthening
(06:13):
its defense and military alliances remains crucial. Live strategy emphasizes
not only bolstering Taiwan's military readiness, but also ensuring its
position in a global supply chain that is increasingly under scrutiny.
Next up, we have one more development to cover, but
just quickly. If you're getting some value from today's episode
of China Update. I have a big favor to ask,
that is just to hit that like button and if
(06:35):
you have not done so already, subscribe. Liking sharing and
subscribing as a tremendous help for the channel helps the
algorithm show this to new people, and it's the only
way in which the channel can grow. Patreon and by
Me Coffee links are also in the description for those
who want to help keep the channel financially sustainable and
have access to the occasional bonus episode as well. Thank
you so much everybody for the ongoing support. Let's continue
(06:58):
on Sunday, China and Failed. The so called CR four
fifty the next generation bullet train poised to set a
new benchmark in global rail transport. Designed by the state
owned China State Railway Group, the CR four fifty is
engineered for record breaking speeds, reaching up to four hundred
and fifty kilometers per hour two hundred and eighty miles
(07:19):
per hour in trials and offering a commercial operating speed
of four hundred kilometers per hour two hundred and forty
nine miles per hour. This innovation aims to solidify China's
dominance in high speed rail technology enhancing its global competitiveness.
The CR four to fifty represents a major advancement over
its predecessor, the CR four hundred, currently the fastest commercial
(07:41):
train at three hundred and fifty kilometers per hour. With
a lighter body twelve percent less weight, and a streamlined
errw like design, the CR four fifty improves energy efficiency
and operational resistance by twenty percent. Enhanced braking performance and
noise reduction further contribute to its cutting edge features. Launched
in twenty twenty one, they see our four to fifty
(08:02):
technology innovation project emphasizes safety, sustainability, and energy efficiency. Recent
tests have demonstrated its capabilities, including a record breaking relative
speed of eight hundred and ninety one kilometers per hour
during trials where two trains past each other. The project
aligns with China's fourteenth five year plan, which includes extensive
(08:25):
infrastructure upgrades to support the expanded rail network. The CR
fifty's debut is anticipated to greatly improve travel times, cutting
the Beijing through Shallhei journey from four point five hours
to just over three hours. Although an exact launch date
remains unconfirmed, the train could begin operations as early as
twenty twenty five, With over forty seven thousand kilometers of
(08:47):
high speed rail already in service, China's latest innovation promises
to reinforce its status as a global leader in high
speed rail technology. Of course, China's high speed rail network,
while impressive in scale and ambition, faces several challenges too,
including high costs, safety concerns, and operational inefficiencies. China has
(09:09):
spent more than five hundred billion US dollars on new tracks, trains,
and stations in the past five years alone, while the
country's national railway operator, China State Railway Group, is nearing
one trillion US dollars of debt and other liabilities. And
remember this is just one company. Just keeping up with
its debt requires twenty five billion US dollars annually. The
(09:30):
total debt tied to China's railway expansion is even higher,
since cash strapped local governments, which, as we just covered
in Part one, have lost, likely permanently, a major source
of extra budgetary revenue, are being required to bear many
of the costs of new projects. Over time, maintenance costs
will add up. China's nearly thirty thousand miles of high
(09:52):
speed rail is already more than enough to circle the
entire globe. China State Railway envisions adding nearly fifteen thousand
miles more by twenty thirty five, costing hundreds of billions
of dollars, As the US base Wall Street Journal wrote
a few months back, Chaotian, a scholar at Baiting Jialdhol
University who has been critical of the high speed rail buildout,
(10:13):
has argued in commentaries that China is turning a blind
eye to the system's financial perils. He has said the
country would have been better off only building a few
hundred miles of high speed rail in its most densely
populated areas, then hundreds of billions of dollars could have
instead been invested in traditional railways that can also handle freight.
(10:34):
He said, many lines in China were running fewer than
sixteen pairs of trains daily in both directions, a fraction
of their capabilities. High freed rail and China in both
ambition and scale is very impressive, but it does have
a large cost in the trillions of dollars an Only
time will tell whether the fruits of these labors will
(10:54):
be worth the costs. Okay, that is today's episode of
China Update. Thank you so much. Everybody for watching, have
a good Wednesday, have a happy New Year, and I
will see you all tomorrow
Welcome to another episode of China Update, where it provides
you with the most up to date, political, economic, and
due strategic analysis on the world's number two economy. My
name is Tony. Happy Wednesday and happy New Year. Let's
jump in. First up, we start with the Chinese economy.
Land sales across China have experienced a significant downturn, dropping
(00:20):
by nearly twenty percent in twenty twenty four, marking the
lowest levels in years and highlighting ongoing difficulties in the
nation's property sector. According to data from China Index Academy
published on Monday of this week, just a few days
before the new year, land sales into three hundred cities
total just one point three eight billion square meters, a
sixteen percent year on year decline. Other institutions, such as
(00:44):
the China Real Estate Information Corps, estimate the fall to
be around seventeen percent, with total land sales expected to
reach approximately one point one billion square meters by the
end of the year. This sharp decrease contrasts with the
pre twenty twenty one period, when annual land transact actions
consistently surpassed two billion square meters, fueled by a thriving
(01:04):
property market. However, since the third quarter of twenty twenty one,
a liquidity crisis and falling property sales have forced developers
to reduce investments and land acquisitions and a bid to survive.
As a result, land transactions, that is, land use transactions
across the country have collapsed. While there were occasional uptecks,
such as in Uhan, where December sales surged to forty
(01:25):
one point eight billion YAN, the broader trend remains bleak.
Local government backed investment vehicles have been among the primary buyers,
often at premium prices. Despite some signs of revival in
the latter half of twenty twenty four, such as stabilizing
new home prices, many regions have seen revenues from land
sales falled by thirty to fifty percent, with developers cautious
(01:48):
about new projects due to sluggish sales. CRIC data reveals
that in thirty major cities, only forty seven percent of
residential land purchased from twenty twenty three to mid twenty
twenty four has been construction. The situation underscores the ongoing
challenge in China's real estate market and the uncertain roadorhead
for developers. Meanwhile, According to new official data from the
Ministry of Finance, local government revenue from land sales amounted
(02:11):
to three point three trillion YAN in twenty twenty four,
down twenty two point four percent from the previous year,
and that's officially. Unofficially, it's likely much worse, putting acute
pressure on many local governments and their fiscal health, as
we covered in yesterday's video as well, a December report
from Goldman Sachs found that new home starts and government
revenue from land sales have plunged by almost seventy percent
(02:35):
from their peak in twenty twenty one. That is worth repeating.
Land sales revenue, or land use sales revenue, represents a
major extra budgetary source of revenue for local governments. Since
its peak in twenty twenty one, government revenue from this
source has declined seventy percent. We also note that over
(02:57):
fifty percent of land use rights were purchased by state
directed firms, including local government financing vehicles. That is, state
money being used to keep land prices up so that
the state has the extra revenue. This is incredibly risky.
Local governments are essentially borrowing so that their government vehicles
have the cash to purchase land so that they have
(03:18):
access to this extra budgetary source of revenue to meet
fiscal obligations. If China's slow down is structural, then when
it comes to this land market fiscal income growth matrix,
then this fiscal mechanism is at its end. It is
at the end for China. The fiscal system is broken
and will need to be fixed before it is too late.
(03:41):
Next up, Taiwanese President William Leitzender has pledged to continue
increasing the island's defense budget and military capabilities as Beijing
intensifies military drills near Taiwan, signaling its willingness to use
force to assert control over the South ruled island. Speaking
during his New Year address today, Lie stressed the importance
(04:02):
of being quote prepared for danger in times of peace
in quote, and vowed to demonstrate Taiwan's unwaiving determination to
defend itself. Since Li's inauguration in May twenty twenty four,
China has ramped up pressure on Taiwan, conducting two large
scale military exercises encircling the island. The most recent drills
followed Li's December trip to the United States territories of
(04:22):
Hawaii and Guam. Which prompted Beijing to launch what Taipei
called its largest naval deployment in years. These exercises have
showcased China's growing military presence and its capability to encircle Taiwan,
underscoring Beijing's long standing objective to bring the island under
its control by force if necessary. Li's calls for enhanced
(04:43):
defense spending come amid growing concerns over Taiwan's security. This
uncertainty is compounded by Taiwan's political challenges at home. Li's
ruling party does not hold a majority in the legislature,
where opposition lawmakers are pushing for a budget overhaul that
could reduce defense spending by twenty eight percent. The challenges,
Taiwan has committed to a record military budget for twenty
(05:03):
twenty five, although political turbulence could jeopardize these plans. In
response to the evolving threats, Taiwan is increasing its focus
on modern warfare technologies. The island has signed agreements with
the US Company's Aero Verronements and Underill Industries to purchase
up to one thousand detact rones, which are becoming a
critical component encountering potential Chinese aggression. Drone development has also
(05:27):
become a key aspect of Taiwan's broader defense strategy, particularly
as China has employed drones for surveillance around Taiwan in
recent years. Meanwhile, Taiwan's defense plans are not limited to
military matters. Lai has also voiced concerns over China's impact
on global trade, particularly its practice of so called low
priced dumping of goods, which he believes all harm global markets.
(05:49):
As part of a broader international effort, the US and
EU have imposed tariffs on a range of Chinese products
to protect domestic industries. We have covered all of this
in the past, which as a significant trade surplus with
the US, could be caught in the cross fire of
this trade conflict, potentially facing new tariffs under Trump's administration.
With cross straight tensions remaining high, Taiwan's commitment to strengthening
(06:13):
its defense and military alliances remains crucial. Live strategy emphasizes
not only bolstering Taiwan's military readiness, but also ensuring its
position in a global supply chain that is increasingly under scrutiny.
Next up, we have one more development to cover, but
just quickly. If you're getting some value from today's episode
of China Update. I have a big favor to ask,
that is just to hit that like button and if
(06:35):
you have not done so already, subscribe. Liking sharing and
subscribing as a tremendous help for the channel helps the
algorithm show this to new people, and it's the only
way in which the channel can grow. Patreon and by
Me Coffee links are also in the description for those
who want to help keep the channel financially sustainable and
have access to the occasional bonus episode as well. Thank
you so much everybody for the ongoing support. Let's continue
(06:58):
on Sunday, China and Failed. The so called CR four
fifty the next generation bullet train poised to set a
new benchmark in global rail transport. Designed by the state
owned China State Railway Group, the CR four fifty is
engineered for record breaking speeds, reaching up to four hundred
and fifty kilometers per hour two hundred and eighty miles
(07:19):
per hour in trials and offering a commercial operating speed
of four hundred kilometers per hour two hundred and forty
nine miles per hour. This innovation aims to solidify China's
dominance in high speed rail technology enhancing its global competitiveness.
The CR four to fifty represents a major advancement over
its predecessor, the CR four hundred, currently the fastest commercial
(07:41):
train at three hundred and fifty kilometers per hour. With
a lighter body twelve percent less weight, and a streamlined
errw like design, the CR four fifty improves energy efficiency
and operational resistance by twenty percent. Enhanced braking performance and
noise reduction further contribute to its cutting edge features. Launched
in twenty twenty one, they see our four to fifty
(08:02):
technology innovation project emphasizes safety, sustainability, and energy efficiency. Recent
tests have demonstrated its capabilities, including a record breaking relative
speed of eight hundred and ninety one kilometers per hour
during trials where two trains past each other. The project
aligns with China's fourteenth five year plan, which includes extensive
(08:25):
infrastructure upgrades to support the expanded rail network. The CR
fifty's debut is anticipated to greatly improve travel times, cutting
the Beijing through Shallhei journey from four point five hours
to just over three hours. Although an exact launch date
remains unconfirmed, the train could begin operations as early as
twenty twenty five, With over forty seven thousand kilometers of
(08:47):
high speed rail already in service, China's latest innovation promises
to reinforce its status as a global leader in high
speed rail technology. Of course, China's high speed rail network,
while impressive in scale and ambition, faces several challenges too,
including high costs, safety concerns, and operational inefficiencies. China has
(09:09):
spent more than five hundred billion US dollars on new tracks, trains,
and stations in the past five years alone, while the
country's national railway operator, China State Railway Group, is nearing
one trillion US dollars of debt and other liabilities. And
remember this is just one company. Just keeping up with
its debt requires twenty five billion US dollars annually. The
(09:30):
total debt tied to China's railway expansion is even higher,
since cash strapped local governments, which, as we just covered
in Part one, have lost, likely permanently, a major source
of extra budgetary revenue, are being required to bear many
of the costs of new projects. Over time, maintenance costs
will add up. China's nearly thirty thousand miles of high
(09:52):
speed rail is already more than enough to circle the
entire globe. China State Railway envisions adding nearly fifteen thousand
miles more by twenty thirty five, costing hundreds of billions
of dollars, As the US base Wall Street Journal wrote
a few months back, Chaotian, a scholar at Baiting Jialdhol
University who has been critical of the high speed rail buildout,
(10:13):
has argued in commentaries that China is turning a blind
eye to the system's financial perils. He has said the
country would have been better off only building a few
hundred miles of high speed rail in its most densely
populated areas, then hundreds of billions of dollars could have
instead been invested in traditional railways that can also handle freight.
(10:34):
He said, many lines in China were running fewer than
sixteen pairs of trains daily in both directions, a fraction
of their capabilities. High freed rail and China in both
ambition and scale is very impressive, but it does have
a large cost in the trillions of dollars an Only
time will tell whether the fruits of these labors will
(10:54):
be worth the costs. Okay, that is today's episode of
China Update. Thank you so much. Everybody for watching, have
a good Wednesday, have a happy New Year, and I
will see you all tomorrow
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