SinoInsight 1
China’s property investment rose 11.6 percent (1.209 trillion yuan) in January-February 2019 from a year earlier, according to data released by the National Bureau of Statistics on March 14. This was the strongest year-on-year growth for the January-February since November 2014.
In January-February, however, real estate developers acquired 15.45 million square meters of land, a 34.1 percent drop from a year ago. This was the largest decline since March 2009 and the second largest drop since July 1998 (the NBS started releasing statistics in 1998).
Further, property sales by floor area in January-February were down 3.6 percent to 141.02 million square meters, the first negative growth since June 2015 and the first of the current property cycle. Meanwhile, sales of commercial housing in January-February was 1.2803 trillion yuan, an increase of 2.8 percent from a year earlier and the lowest in 43 months.
OUR TAKE
1. The situation with China’s property markets appears to have improved in considering the official property investment data alone. However, land acquisition and sales by floor area figures suggest an obvious down cycle.
Property investment data is a lagging indicator. The discrepancy between rising property investment and dropping land acquisition is likely the result of land acquisition fees being paid in installments; the former rose due to the increase in land sales during an earlier period.
2. The area of land acquired fell by more than a third in January-February, a sign that property developers are cutting back on investments due to pessimism about the future of the property market. Meanwhile, weakening property sales indicate that consumer purchasing power in China is waning.
3. In our China 2019 outlook, we wrote: “Property prices will likely fluctuate drastically (small spurt in prices followed by sharp drops). Property prices in some areas may fall by as much as 30 to 50 percent.”
China’s recently released economic data is in line with the trend which we predicted.
SinoInsight 2
Nur Bekri, the former director of China’s National Energy Administration and deputy director at the National Development and Reform Commission, was expelled from the Chinese Communist Party for corruption, according to a March 16 statement by the Central Commission for Discipline Inspection. The CCDI statement also noted that Bekri’s case was being handed over to prosecutors.
OUR TAKE
1. We observed an escalation in the CCP factional struggle in recent weeks. In our March 13 analysis, we wrote that Xi Jinping “will definitely counterattack” against political enemies to “kill the chickens to scare monkeys” in a repeat of the 2015 purges after the Jiang faction’s “financial coup.”
The expulsion and prosecution of Nur Bekri comes a day after the conclusion of the Two Sessions, and appears to be intended to make an example out of him.
2. Western news outlets are reporting that Nur Bekri’s prosecution comes as the CCP has heightened the suppression of Uyghur Muslims in Xinjiang Province. However, we believe that his prosecution has nothing to do with his ethnicity. While Bekri is Uyghur, he has been condemned by the World Uyghur Congress, an international organization of exiled Uyghurs, for being a “CCP puppet.” The World Uyghur Congress and others in the overseas Uyghur community also hold that Bekri “does not represent the Uyghur people.”
3. Nur Bekri was deputy Party secretary of Xinjiang from Dec. 2000 to January 2005. From January 2008 to December 2014, he served as chairman of the Xinjiang Uyghur Autonomous Region. The July 5, 2009 Urumqi riots broke out during Bekri’s stint as chairman. While in the Xinjiang local government, Nur Bekri established close ties with Jiang faction members Wang Lequan and Zhang Chunxian. Bekri’s official connections and career trajectory marks him as a Jiang faction member.
After Xi Jinping took office, Nur Bekri was transferred to the energy department and state planning commission in 2014. While Bekri appeared to have secured prestigious posts and “broke” the norm of Uyghur officials being assigned only to jobs related to ethnic affairs, in hindsight his transfer appears to have been part of Xi’s “luring the tiger away from its mountain domain” (“調虎離山”) strategy to purge Xinjiang of Jiang faction influence.
Xi has used the “luring tiger” strategy on numerous occasions. In August 2016, Xinjiang Party secretary Zhang Chunxian was transferred to the Party building leading group to serve as its deputy director, a “second line” role. At the 19th Party Congress, Zhang lost his seat on the Politburo and became a vice chairman of the National People’s Congress, also a “second line” post. After Zhang’s departure from Xinjiang, many officials in the Xinjiang local government, including the local public security bureau chief, were either purged or transferred to other posts.
3. The arrest and prosecution of Nur Bekri would have facilitated the Xi camp’s gathering of information regarding the corruption of Xinjiang’s previous two Party secretaries. We believe that Zhang Chunxian’s political risks have increased to a large extent, and whether or not he is purged depends on the state of the Xi-Jiang factional struggle.