Chinese deflation, consumer price decline, real estate company credit downgrade

Chinese deflation, consumer price decline, real estate company credit downgrade

Deflation in China led to a 0.4% drop in consumer prices, an accelerated decline in producer prices, a blockage in real estate bonds and a downgrade in credit ratings.
In China, exports fell by 14.5% more than expected in the July indicator and imports plummeted more than twice as expected, and the fall in the consumer price index (CPI) is leading to a further decline in the real estate market.
Reuters columnist Jamie McGeever, a financial market expert, commented on China's CPI decline in the Asian market diagnosis, saying, "China has become the first G20 country to go into deflation since Japan's last negative CPI growth 30 years ago." The rate of decline accelerated this year from monthly declines on an annualized basis, marking the deepest factory gate deflation.”

Robin Xing, a China economist at Morgan Stanley in the US, said, “China has definitely fallen into deflation. “How long deflation will last now,” he said to Bloomberg on the 9th, “depending on how policy authorities and monetary authorities respond.”

Hong Kong's benchmark real estate index fell nearly 5 per cent on Monday as China's largest privately owned property developer fell into repayment troubles.
China's blue-chip CSI 300 index fell continuously and the yuan fell to its lowest level against the dollar.
Chinese real estate firm Country Garden said in a statement on the 8th that it will not pay coupons for bonds maturing in 2026 and is seeking new capital for creditors' legal rights, Reuters reported.
China's huge real estate market has suffered a string of defaults by cash-strapped developers since late 2021, with China Evergrande Group, the world's most indebted property developer, at the center of the crisis, Reuters reported.
Commenting on the Country Garden bond debacle, Credit Sight analyst Nicholas Chen said, "The fact that (Country Garden) is struggling to settle interest payments rather than full principal payments on the bonds probably underscores very tight liquidity." "Looking at it, such an event would have a negative ripple effect on investor sentiment in the sector, especially other privately operated developers," he told Reuters.
Country Garden already saw a 30% drop in contract sales in the first half of the year, coinciding with an accelerating decline in the broader real estate sector.
Reuters said in its assessment of the June decline in China's real estate market, real estate sales by floor area fell 28.1 per cent year-on-year, calculated based on data from the National Bureau of Statistics (NBS).
US credit rating agency Moody's downgraded Country Garden's credit rating to "B1" last week, highlighting its still limited access to financing and significant debt to maturity over the next 12-18 months.
On the 8th, Moody's downgraded the credit ratings of 10 small and medium-sized banks in the United States by one notch and announced that five large banks were in the'review phase' of the possibility of a potential downgrade.
The shock began when Moody's' US bank credit rating warning shifted to Asian stock markets after the US stock market's S&P 500 and Nasdaq index fell to record highs last month.
The Federal Reserve Bank of New York (FRB) announced on the 8th that credit card debt outstanding exceeded $1 trillion for the first time and the credit card delinquency rate is at an 11-year high, even though overall household debt burden has not changed much.
The New York Fed went on to say that household debt rose 0.1% to $17 trillion, while mortgage balances, the largest part of total household debt and generally the biggest driver, remained largely unchanged.