Important decline in property development and car sales
Beijing (AsiaNews/SCMP) Economic growth is not evenly spread in China. In the first quarter of 2005, real estate prices and car sales have dropped substantially.
In Shanghai, property development is slowing down with residential property prices falling 9 per cent last month to 8,097 yuan (US$ 878) per square metre.
In Shanghai's emerging suburban belt, places like Zhabei, Putuo and Minhang have seen the drop top 40 per cent.
For some analysts, government measures to stifle speculation were less important in damping the property markets than the rising prices which have cut out regular home buyers in favour of investors, especially from Hong Kong and Singapore and linked to foreign capital, who are trying to make a quick yuan.
In Shanghai, home buyers are only
One third of all deeds are signed by people intending to resale; only two thirds buy to live.
In March, the Shanghai authorities introduced a capital gains tax of about 5.5 per cent on properties resold within a year in a bid to curb speculation. And earlier this month, the central government announced a basket of measures to take effect at the start of next month, including a sales tax on residential flats sold within two years of purchase, tax penalties on developers who hold idle land, and tighter bank lending.
These measures penalise would-be homeowners more than investors.
Average daily sales of new homes stayed between 200 and 300 units last week, down from more than 400 on a single day early this month and 600 on a day in mid-March, the China Daily reported.
Official estimates forecast a drop in prices of 25/30 per cent in Shanghai and Beijing within two years.
The auto sector is also in the doldrums. The China Auto Industry Association showed vehicle sales in the four months of 1.803 million units, up 1.57 per cent over the same period last year. But just 1.14 million passenger cars were sold, down a comparative 0.62 per cent.
Sales had risen an annual 40 per cent in 2002 and 2003 and 14 per cent last year, but now the market is stagnating. Experts forecast just a 5 per cent increase in sales this year.
Car prices remain beyond the average worker in a car-making company and little incentive is available to consumers.
Most promising are medium-size and large commercial vehiclesthe new status symboland least promising are passenger cars which, despite falling prices and profits, have seen the cost of raw materials rises.
Hurting consumption are soaring fuel prices, bank controls on car loans, worsening traffic congestion and scarce parking space in key cities.
The top five producers who in joint ventures with Chinese companies tend to dominate the domestic market with few models and high ticket prices. Until recently, they accounted for 67 per cent of sales.
However, the market is not consolidating but diversifying, with more players and more models, spreading profits even more thinly.
Among the worst hit is Volkswagen, which has two joint venturesin Changchun and Shanghaiand had 40 per cent of the market as recently as 2002.
It was down to 25.2 per cent last year, when annual sales fell 7.1 per cent
For this reason, two of its plants were closed, to reduce capacity, allow for retooling for production of new models.
Dongfeng Yueda Kia Motors lost 42 million yuan in the first quarter, against a profit of 60 million in the same period last year, the Oriental Morning News reported.
Only General Motors announced a 7.2 per cent increase in sales up to 190,676 units in the first four months of 2005, slicing away some of its competitors' market shares. (PB)
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