As China’s property slump persists, one developer is trying to entice farmers to buy homes by accepting their crops as payment. 

Central China Real Estate Ltd. is offering to pay farmers as much as 160,000 yuan ($24,000) for their wheat to offset down payments for homes in its River Mansion residential project in Shangqiu, a city in Henan province, according to a Monday marketing post. Weeks ago, it offered to accept garlic from growers looking to buy homes in another project in Kaifeng city.

The move reflects how far some developers are willing to go to attract wary homebuyers as the economy slows and the industry endures a crippling cash crunch. Central China, the country’s 37th-largest builder, recently sought state support when its parent company agreed to sell a stake to the provincial government. 

Its perk to farmers appears aggressive. Central China was offering to buy wheat at 4 yuan a kilogram, higher than the record 3-3.1 yuan that China’s state stockpiling company was purchasing the grain for earlier this month. 

Landlocked Henan is China’s largest wheat-producing area. The country just had another bumper harvest of winter-sown wheat. 

Similarly for garlic, Central China offered to pay 10 yuan a kilogram last month. That’s higher than the 6.92 yuan wholesale price as of June 10, according to weekly data released by the commerce ministry. 

Eoin Treacy's view

Property manias tend to start in prime areas and move progressively further into the hinterland. During a crash it is usually the third tier cities and far flung suburbs that see the most aggressive selling pressure. Eventually, even the prime areas take a hit. China’s tier 3 cities have seen an epic bull market in housing as capital fled the exorbitant prices in the tier 1 cities. It is a measure of how desperate the company is to make sales that it is now willing to accept volatile commodities rather than insist on cash.
China Central has trended lower in an aggressively manner from early 2021 and is now steadying in the region of the 2008 lows. It has posted two upside weekly key reversals from the HK$0.50 level in the last couple of months so a sustained move below that level would be required to question support building.
China’s credit impulse has turned decisively higher and historically has supported asset prices. It’s almost back into expansion so it would be reasonable to expect Chinese risk assets to bounce. That was the rationale for the bullish sentiment around Chinese shares in the media a couple of weeks ago.

However, the economic challenge of the COVID-zero policy and the high price of property suggest an outsized stimulus effort will be required to reignite growth. Inventories are rising quickly in the USA and Europe is in recession so where is the external demand going to come from to support China’s growth. They will need to further inflate asset bubbles to support the domestic growth outlook and the Xi administration has spent the last couple of years insisting they are not prepared to do that because of the impact it has on social cohesion.
For Hong Kong there is a clear conflict between higher US rates and easier liquidity from the mainland. At least the Hang Seng is steadying from the region of the lows.