Aurelia Butler

BEIJING/HONG KONG (Reuters) – Beijing resident Hu Yongwei bought more than a dozen apartments in the small central Chinese city of Hebi for about $31,000 in all, betting they will be financially more rewarding than other investments.Hu, who mostly acquired two- or three-bedroom apartments built about three decades ago, spent 18,000 yuan ($2,528) this month in purchasing his 15th property in Hebi, where prices have plunged over the last two years. “The flats were sold very cheaply, like cabbage,” the 39-year-old said, adding his family’s bad experience with the stock market has made him steer clear of shares. Real estate agents said low-cost apartments in smaller Chinese cities such as Huainan and Rushan in the east, and Gejiu in the southwest, are also being bought, largely by people living outside those locations.The deals demonstrate that buyers are starting to turn their attention towards smaller cities in China where property prices are some of the cheapest in the country after years-long declines amid a wider sector downturn and a sluggish overall economy.While the small-city purchases are not significant enough to impact China’s giant real estate market, and data on transaction volumes is not available, they nevertheless indicate that a tiny corner of the crisis-hit sector is exhibiting signs of life.The deals come at a time the picture for China’s property market is getting darker. New home prices rose at a slower pace in May and property investment fell at its fastest in more than two decades, data showed.For buyers with the means to get back into the market, the rock-bottom prices of second-hand apartments in the smaller cities have been hard to resist. Hu paid a surprisingly low 1,000 yuan excluding taxes and fees for one of his apartments in Hebi. According to data from Anjuke, one of China’s largest real estate platforms, prices are 27% off their 2021 peak in some areas in the city.Similarly, prices are as much as 24% below their top in parts of Huainan, Rushan and Gejiu.By comparison, prices in top-tier Beijing, where an average second-hand home can cost tens of thousands of yuan, fell just 1.5% over a six-year period to May this year, while in tier-2 city Chongqing, they fell a little more than 10% over five years, according to Reuters calculations based on Anjuke’s data.’BUYERS ARE NOT LOCALS’Real estate agents said buyers in the small cities are mostly from out of town. They range from speculators who have no intention of living in the apartments, to youth seeking a cheap place to “lie flat”, a Chinese term for doing just enough to get by, to people looking for affordable retirement.In Huainan, “most of the buyers are not locals”, said Zhao, an agent who only gave his surname because he was not authorised to speak to media. “Due to high living costs in big cities, young people come here to buy cheap houses and lie flat.”In Rushan, agent Liu Yong said most buyers are from elsewhere in China, aged 40-to-50 and looking to set up their retirement by the sea. An agent in Gejiu said buyers aim to move there because the cost of living is lower.Analysts, though, are reluctant to draw bullish conclusions from the home purchases in these small cities given broader indications the world’s second-biggest economy is struggling to pick up from COVID-19 lockdowns.Consumer sentiment remains below the range set over the past two decades. Domestic demand is weak as consumers and companies prefer paying down debt to investing. And youth unemployment is at a record high of above 20%.”The fact that there are so many people buying low-cost flats in smaller cities reflects caution,” said Hwabao Trust economist Nie Wen. “People are not confident about their future income.” ($1 = 7.1643 Chinese yuan renminbi) More

The first spaceflight, called “Galactic 01”, is planned between June 27 and June 30, the company said. “Galactic 02” will follow in early August, with monthly spaceflights expected thereafter, the company said.Shares of Virgin Galactic had lost over two-thirds of their value last year due to delays in the company’s launch of commercial service. Shares were up at $6.30 in aftermarket trading on Thursday.The company had suspended flights of the spaceplane VSS Unity and its carrier plane in 2021 to make various spacecraft enhancements, delaying its debut customer mission to the edge of space.But in February, it said it had completed a lengthy upgrade period for its centerpiece tourist spacecraft, clearing the path for its first commercial spaceflight. Shares of the company have risen about 16% so far in 2023.The first commercial mission will carry three crew members from the Italian Air Force and the National Research Council of Italy to conduct microgravity research, Virgin Galactic said. More

TOKYO (Reuters) -One of Bank of Japan Governor Kazuo Ueda’s biggest challenges will be to phase out a controversial yield curve control policy, which is criticised for distorting markets by keeping long-term interest rates low despite creeping inflation.While Ueda has stressed the BOJ will be in no rush to dial back stimulus, the central bank is dropping clues on possible triggers of a policy shift.Below are the options the BOJ could take in ending yield curve control (YCC), which applies a -0.1% rate to some funds parked with the central bank and targets the 10-year government bond in a range around zero, and triggers for action.ABANDON OR TWEAK YIELD TARGETIn ending YCC, the first step will be to abandon or modify the 10-year yield target. Ueda has said YCC was unsuited for minor fine-tuning, suggesting he could abandon the yield cap and shift to a policy solely targeting short-term rates.In doing so, the BOJ could soothe markets by pledging to buy as many bonds as needed to fend off an abrupt spike in yields.If the BOJ feels abandoning the yield cap could be too risky given the market impact, it may take a more measured approach.One idea would be to widen the band around the yield target, now set at 50 basis points on either side. Doing so could ease market distortions by allowing yields to move more freely.Another option would be to target shorter-duration bond yields such as the five-year zone, to allow the longer end of the curve to better reflect economic fundamentals.With the BOJ owning half the Japanese government bond (JGB) market, such moves likely won’t trigger a big, lasting spike in borrowing costs that would severely hurt the economy.But BOJ officials worry about the hit to consumers and companies, who have become long accustomed to ultra-low rates.Many of them prefer to wait at least until the BOJ’s October or December meetings to scrutinise corporate earnings and the degree of a global slowdown, for clues on whether Japan’s wages and economy can continue to strengthen next year.TWEAKING FORWARD GUIDANCEBefore tweaking the yield cap, the BOJ could drop more hints of a policy shift such as by modifying forward guidance.Ueda may issue stronger warnings on the risk of an inflation overshoot, ditching his view the current, cost-driven inflation will slow below the BOJ’s 2% target later this year.Big upward revisions to its inflation forecasts at a July quarterly review would signal the BOJ’s conviction that conditions for a policy shift are falling into place.While the wage outlook is crucial to the timing of a policy shift, the BOJ is already signalling that Japan’s prolonged era of nascent wage growth may be ending.In an academic paper issued on May 22, the BOJ said inflation and wage growth could accelerate abruptly once costs exceed a certain threshold – and that once wages begin to rise, the trend could persist. Such academic papers can provide a theoretical backbone of future policy changes.END NEGATIVE RATESThe BOJ could abandon the 0.1% charge applied to a portion of excess reserves financial institutions park with the central bank. It could then mop up liquidity from markets and start raising short-term rates. The move will ease the pain on commercial banks, which have seen margins crushed by years of ultra-low rates.But the threshold would be higher than that for tweaking the 10-year yield cap, as it would cool the economy by increasing rates for bank lending and mortgage loans.The BOJ would likely wait until there is evidence Japan can sustain a positive cycle, in which rising prices generate higher pay that gives households more purchasing power. A hike in short-term rates would thus come well after an end to the yield target. More

BEIJING (Reuters) -China will roll out more stimulus to support a slowing economy this year, but concerns over debt and capital flight will keep measures targeted at shoring up weak demand in the consumer and private sectors, sources involved in policy discussions said.The world’s second-largest economy stumbled in May with data on Thursday showing factory output and retail sales growth missing forecasts, adding to signs that the post-pandemic recovery is rapidly losing steam.China’s cabinet is soliciting proposals from economists and advisers, policy insiders told Reuters, with big changes needing approval from top party leaders, and investors now looking to an expected Politburo meeting in July for clues on policy direction.While the central bank this week lowered borrowing costs, sources say fiscal stimulus will be needed to revive activity with a particular focus on household subsidies and bigger bond issuance to prop up investment.However, policymakers will remain wary of aggressive support measures for property, unwilling to fan speculative real estate investment, especially in big cities, after massive oversupply in the sector.”Rates cuts are needed, but to make them effective we need to rely on fiscal policy to boost investment and we need property policy to unleash demand,” said a policy insider who requested anonymity due to the sensitivity of the matter.China’s central bank on Thursday cut the interest rate on its one-year medium-term lending facility, the first such easing in 10 months, paving the way for cuts in the benchmark loan prime rates (LPR) next week.Another source said a cut to the People’s Bank of China’s (PBOC) reserve requirement ratio (RRR) was increasingly possible.In March, the PBOC cut its RRR and economists in a Reuters poll in April expected the rate to remain unchanged for the rest of the year.However, the modest borrowing cost cuts – limited by concerns over banks’ profitability and currency stability – will not be enough to boost economic activity, policy insiders said.Monetary easing has also been less effective as households and private firms build up savings and reduce borrowing and spending to repair balance sheets after three years of COVID curbs.Thursday’s data showed private fixed-asset investment fell 0.1% in January-May from a year earlier, a sharp contrast to the 8.4% rise in state-sector investment.CONSTRAINTSLocal governments are likely to quicken bond issuance in the coming months to fund infrastructure projects, and authorities may give more support to consumers, especially for purchases of cars and home appliances, policy insiders said.But with China’s debt burden nearly three times its gross domestic product, there will be limited scope to spur infrastructure spending, a playbook Beijing has used to counter economic downturns since the 2008-09 crisis.Authorities are also considering support for the ailing property sector after earlier measures failed to gain traction, including easing credit conditions and home buying curbs in some areas, policy insiders. However, these steps are likely to be modest amid wider concerns about overheating property.China remains on track to hit its 2023 growth target of around 5%, versus last year’s 3% increase, but activity in recent months has been weaker than expected and policy support is needed to restore momentum amid fears of job losses and local financial stress, policy insiders said.”Slower growth – even if it’s within the target range – brings with it its own problems, particularly for local governments, for the property sector and for employment,” said Rory Green, an economist at TS Lombard. “So I do think there is a mini stimulus push coming.”Economists blame the fading recovery on the “scarring effects” caused by COVID and regulatory curbs on property and tech sectors, which have hit household and private sector spending.The government has prioritised a consumption recovery this year, but has so far not delivered large-scale subsidies for consumers.Supporting depressed private-sector firms, which account for 60% of economic output and 80% of urban employment, will be essential to lift incomes, jobs and consumption, policy insiders and analysts said.”We should take concrete steps to boost confidence of private firms,” said Jia Kang, former head of the finance ministry’s think tank who runs the China Academy of New Supply-Side Economics. More