At first, two very important facts: The last time China had real GDP growth of less than 5% was in 1990 and their last recession was in 1976 when we saw a 3% contraction in real GDP!

The tensions are still heating up. Clearly, investors are not waiting for resolution. Many individuals and businesses have been selling off U.S. assets. But of course this isn’t directly related to the trade issues but it is compounded through uncertainty. Countless economic indicators have piled up showing that China’s slowdown is still continuing despite the rhetoric that everything is doing "just fine".

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Chinese purchases of U.S. real estate last year dwindled to their lowest level since 2012, as Beijing kept up the pressure on Chinese investors to bring cash home during a period of worsening economic growth. Insurers, conglomerates and other investors from mainland China were net sellers of $854 million of U.S. commercial real estate in the fourth quarter, according to Real Capital Analytics. That marked the third-straight quarter Chinese investors sold more U.S. property than they bought, the first time ever these investors have been sellers for that long a stretch.

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source: wjs.com

source: zerohedge

The left-hand chart is talking about the average mortgage rate, remaining very high compared to the rental yields mortgage rate. It's just interesting to see that specifically on the right-hand side, house prices in China's major cities are among the most expensive in the world!

We're looking at the price to income ratio and to give you an idea - the very very bottom of this list is New York. And New York is excessively expensive and we're not just talking about dollar terms. We're talking about price to income. So, wages that the average person makes and what the average home costs.

Left part of the list is much more expensive in terms of price to income than New York. You go along with that and you start to see these Chinese cities on the left. Hong Kong at the top of the list! it is insane. The highest on this list and there is no possible way that the average person is able to afford a place. There's just not a possible solution to this. They can't do anything to make it more reasonably expensive for people by let's say giving them money every month or letting them use some sort of tax credit. It's far beyond that.

So, we need to start asking ourselves:

Who do these assets (being priced at this level) really benefit?

Wouldn't it make more sense to have these assets like real estate be priced at a semi realistic level? Well of course not! That's ridiculous ;)

source: zerohedge

As most people say anyway, they feel very rich when their homes go up in price. Many people are using their home as an investment. They've been doing so for quite a while and it's only getting worse. Second home and third home buy is at a record high. Trend of home buys can be seen on the right side. As the years go on, they're purchasing more second and third homes. This data actually goes back into the first quarter of 2018 but it's very valid today. But that remains to be part of a issue in the future - property transactions versus house price inflation implies fall in house prices.

source: zerohedge

Future property transactions versus house price inflation implies fall in house prices. When you look at China's property transactions you could see the decline from 2015 up until present. On average it's been declining. And the house price inflation while it has moved up... this tends to be an indicator that we will see a decline. You can see the property transactions, which will in fact have to track and trace the behaviour of MSCI China relative.

source: zerohedge

Growth of income available to spend dropped sharply. You can see the red line disposable income net of debt service and that has declined.

The last time China had real GDP growth of less than 5% was in 1990 and their last recession was in 1976 when we saw a 3% contraction in real GDP

Real GDP continues to decline. It's very very important to address, what has happened in China today. They're saying it's over 6% however we need to really come to our senses in reality. Take a look at the chart above. You can see what has happened since basically what we had here was the year 2000 when it rises like crazy and then there is a major contraction towards the financial crisis but after that continued his trend on the way up very rapidly. And then it didn't take long before the stimulus wears off and you can see that demand really really sliding down.

I hope you understand where is all this going.

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