On Monday, Chinese equity markets were down more than 1% after reports surfaced that China’s Industrial Bank had stopped lending to property/housing-related projects, and the rise in home prices in China showed signs of slowing in January.
As a bit of background, the China bears have long warned that there is a huge real-estate bubble in China that will eventually pop. When it does, they argue, it could take the entire market down with it. That means we would see a repeat of the housing bust that we saw here in the U.S. in 2008. So, any negative China real estate news is usually a short-term negative, and that’s what happened Monday.
Yet while the focus was on housing and lending markets, I think the more important event in China of late is the fact that the Chinese yuan very quietly fell 1.3% vs. the U.S. dollar last week. The yuan also dropped sharply against the greenback on Monday.