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Copper and Chinese real estate equity prices have become closely correlated over the last 15 months, and Longview Economics suggests both prices are at risk of material falls in the coming months and quarters, in the absence of meaningful government support.
In an attempt to ward off a major collapse in housing completions, the Chinese government has been providing support by various means, yet Longview points out policymakers are reluctant to overstimulate the real estate market.
This balancing act has resulted in flat average house prices in China since 2021.
Worryingly, in the past few weeks, defaults and delinquencies for major property developers have picked up again, notes Longview, and pushed US dollar high-yield bond prices to the lowest levels since late 2022 (yields rise when bonds are sold off).
Longview highlights the Chinese government is faced with challenges across four key parts of the real estate market: land sales; transactions; construction activity; and completions.