1.The Central Bank of China Has Issued Three Consecutive Policies Targeting Real Estate

On May 17, the People’s Bank of China introduced three new policies to support the real estate market:

1. The minimum down payment for a first home was set at 15% (30% before), while buyers of a second home need to make a 25% (50% before) down payment
2. The Central Provident Fund (CPF) lending rate was reduced by 0.25 percentage points
3. The lower limit on interest rates for commercial personal housing loans for both first and second homes was removed.

In China, the real estate sector is closely tied to the broader economy and local government finances. Any changes in this market can have widespread economic effects. A report by the Central Bank of China shows that about 70% of Chinese household assets are in real estate, with around 70% of their liabilities also related to housing.

These new policies highlight the Chinese government’s approach to the property market. Firstly, reducing the real estate inventory is crucial. To meet housing goals, the government might need to purchase commercial housing in more cities at reasonable prices, converting some into social housing. Secondly, the return on bank deposits is currently very low, with one-year deposit rates just above 1% and likely to fall further. As a result, many people may soon invest in ultra-long-term treasury bonds. However, in the long run, only high-quality assets can effectively hedge against inflation.

2.In April, Deposits Declined by Approximately CNY 4 Trillion, Prompting Concerns in the Market

On May 11, the Central Bank of China released a report on April’s financial statistics, revealing a sharp decrease in deposits by nearly CNY 4 trillion in a single month. Both individual and corporate deposits saw declines. Corporate deposits fell by CNY 1.87 trillion, an increase of CNY 1.73 trillion compared to the previous year. Similarly, residential deposits dropped by 1.85 trillion CNY, which is CNY 650 billion more than the decline seen last year.

Industry experts attribute this significant drop in deposits to seasonal factors and heightened regulatory oversight of banks’ interest replenishment practices. In response, a substantial portion of deposit funds has been redirected to bank wealth management and other asset management products. Additionally, recent fluctuations in the net value of financial products have led some residents to choose early loan repayments, further exacerbating the decline in deposits.

Despite this significant shift toward financial products, the trend of deposit regularization continues, with both enterprises and residents favoring time deposits. This is evident in the year-on-year increase in the share of time deposits compared to other deposit types. According to the Central Bank of China’s policy report, the share of time deposits has risen from approximately 60% in 2017 to around 70% currently, reflecting a long-term trend in deposit structure changes.

Data Source: http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/5348260/index.html

3.”Shanghai Pass” Launches to Optimize Payment Services for Inbound Tourists in Shanghai

On May 19, Shanghai launched the “Shanghai Pass” to enhance its status as the primary destination for inbound tourism in China. This card addresses foreign tourists’ issues with mobile payments and inconvenient reservations, further optimizing payment services for visitors.

The “Shanghai Pass” is an anonymous physical card that operates on a prepaid basis, with refunds available for unused small balances. Tourists can purchase, recharge, refund, and repair the card at various locations, including Hongqiao Airport, Pudong Airport, and official transit card service outlets.

Currently, the “Shanghai Pass” covers all transportation modes in Shanghai, including buses, subways, taxis, and ferries. It can also be used in public transportation across over 330 cities in China. Additionally, at popular attractions and cultural venues in Shanghai, such as the Oriental Pearl Tower, Huangpu River Cruises, Shanghai Tower Observation Deck, Shanghai Museum, and Shanghai Wild Animal Park, tourists can use the card for on-site payment to enter.

Data Source: http://sh.people.com.cn/n2/2024/0520/c138654-40849668.html

4.The United States Has Increased Tariffs on Electric Vehicles Imported from China to 100%

The U.S. government is preparing to announce significant adjustments to tariffs targeting China, focusing particularly on strategically important sectors like electric vehicles and solar cells. According to Bloomberg on May 14, this major change, expected to be announced in the coming days, includes a substantial increase in tariffs on electric vehicles from the current rate of approximately 25% to an unprecedented 100%. Additionally, a new 2.5% tariff will be imposed on all cars imported from China.

This move is part of a broader effort to expand the definition of Section 301, initially implemented by President Donald Trump’s administration in 2018 to increase economic pressure on China in specific high-risk industries. Despite their long-standing differences, Trump and Biden have agreed on limiting the growth of China’s new energy vehicle industry. The government’s strategic focus on sectors like electric vehicles, batteries, and solar cells aims to strengthen local industries while weakening China’s dominance in these crucial markets.

The U.S. decision to target China’s electric vehicles is driven by concerns about the impact on the domestic automotive industry and the need to protect their own market. Additionally, the U.S. is attempting to influence other countries to adopt similar confrontational measures to block China’s new energy industry development on an international scale.

However, according to data from the China Passenger Car Association, in 2023, China exported a total of 74,800 passenger cars to the United States, accounting for only 1.4% of its total car exports. Of these, 18,600 were new energy passenger cars, making up just 0.4% of the total.

5.This Week, Leading EV Auto Companies Announced Their Major Developments in China’s Competitive Market

• NIO：On the evening of May 15, NIO officially launched its second sub-brand, “ONVO Auto.” The first model, the mid-sized SUV ONVO L60, has a pre-sale price of CNY 219,900, which is CNY 30,000 cheaper than the Tesla Model Y. On May 17, NIO announced that after forming strategic partnerships with GAC Group, Changan Automobile, Geely Holding, Chery Automobile, JAC Group, and Lotus, China FAW Group has also joined the NIO Power Swap Alliance. Previously, NIO’s founder, Li Bin, mentioned that the company’s power swap alliance included seven automakers.
• Lynk & Co: On May 17, Lynk & Co held a launch event in Beijing for its new model-Lynk & Co 07 EM-P. The hybrid range-extended Lynk & Co 07 EM-P is now officially available in three versions: 126 Long Range Pro, 126 Long Range Halo, and 126 Long Range Ultra, with prices ranging from CNY 169,800 to CNY 189,800. The new cars are scheduled for delivery starting in May.
• Volkswagen: Volkswagen has abandoned its plan to fully focus on developing electric vehicles. The brand, which previously positioned its ID series of electric cars as the future core, admitted last week that with the slowdown in electric vehicle sales, it will shift focus from Electric Vehicles to Plug-In Hybrids, impacting on the its market performance in China.
• Tesla: Tesla has received the construction permit for its Shanghai Energy Storage Gigafactory project, the company’s first energy storage gigafactory outside the United States. Currently, Tesla’s battery suppliers include Panasonic, LG Chem, and CATL on the globe basis. According to the company’s announcement, the factory is set to begin construction in May and aims to start mass production in the first quarter of next year.
• Li Auto: Li Auto is implementing a new company-wide staff optimization initiative, with an overall optimization ratio of more than 18%. The optimization ratio indicates that this round of optimization involves more than 5,600 individuals. Specifically, the sales and service operations department will be optimized for more than 400 people, the recruiting department will be downsized from more than 200 to 40-50, and the Smart Driving team will be downsized to less than 1,000 people.

Glopen will continue to closely track developments in this highly competitive market, providing insights and updates as the situation evolves.