The hidden drag on China’s economy

2025-07-09 08:21:16

Here is the building on the Sunac OPUS High-End in Beijing on October 17, 2024.

Bloomberg Bloomberg Gety pictures

This report from CNBC newsletter in CNBC for this week, which brings you visions and analyzes about what leads the second largest economy in the world. Every week, we will explore the largest business stories in China, and make a decrease in market movements and help you prepare for the next week. Like what you see? You can subscribe here.

The big story

Low real estate prices is the elephant in the room when it comes to the Chinese economy.

From June 2023 to June 2025, the average price per square meter for apartments used in 100 main cities decreased by 13 %, according to CNBC accounts for Data that I published last week by Index China AcademyResearch Company. Beijing and Shanghai have witnessed a similar decrease in prices.

It is a bitter pill to swallow for home owners in the hope of earnings. The past decades of high real estate prices have witnessed that many in China are proud of new property before being built or completed, which fueled a speculative bubble-followed by prominent assumptions in Evergrande and other developers.

Now even when the authorities have tried to address the financial risks, the real estate market is far from the apostasy.

“The market is at the bottom, but not in its hall yet,” said Zhou Ning, author of the book “The Bubble Bubble in China”. He pointed out that the real estate market has resumed its decline after some stability during the past few months.

ZHU expects prices to decrease by 20 % to 30 % over the past two years to three years before the market stability. Meanwhile, he said: “Policy makers should be patient” and they can try to use areas or other ways to generate construction demand related to public housing.

China’s Ministry of Housing officials recently visited Guangdong and Zjyang provinces to inspect the local real estate market, and called for an increase in stability efforts, Government media said on Friday. The report also called for building safer and quality houses.

Since late September, the leading leaders in China put a new tone by calling for a It stopped to decline in the real estate sector.

In the past, Beijing focused on reducing the risk of the financial market by taking a great dependence on developers on debt for growth, starting in 2020. However, along with the influence of the epidemic, the developers struggled to complete construction on pre -apartments and increase consumer confidence.

Many home buyers who bought apartments from an unknown developer in Tianjin, near Beijing, told CNBC last year that they promised that the units would be in 2019. So far, there was no word in the progress of construction.

Alpha in a shrinkage package

Despite the problems that afflicted the real estate market in China, a bright point appeared.

Fitch analysts indicated in a report on June 30 in the period of 2024, Jinmao Holdings increased at China Jinmao Holdings of land purchases for development since late 2024 and has witnessed 21 % sales in the first five months of 2025 against the period that occurred throughout the year. This contradicts a 10.8 % decrease for the best 100 Chinese homes, according to the report.

“Local governments give priority to smaller and high -quality projects to meet the demand for a promotion, which led to the smaller conspiracies and costs of a much higher unit in major cities,” Fitch said, noting that governments in smaller cities have greatly reduced land supplies to developers.

Although the scene of many empty store fronts in Beijing reflects the general economic slowdown, a campaign via the growing capital in China reveals a handful of high -end residential property developments in the pipeline.

It is a similar scene in Shanghai and Shangzhou, where Hong Kong Kergi Brobez and Shui’s developers are among those who suffer from upscale apartments and a central location. This is according to the translation of CNBC for his statements in Mandarin.

He said that the target buyer is not the regular family, but the family that has an existing house, and is now looking to upgrade to a unit in a better location. “Now the developers are fighting for this [kind of] client.”

In contrast, “people with medium income who could buy homes, their income has now decreased, or lost their jobs.”

Depression request

The effect of property decline in influencing consumer morale continued.

“The monarchy is the key to consumption,” Larry Ho, the Chinese chief economist in Makari, said in a report on Friday. “The decrease in home prices has led to a negative wealth on consumption, as housing represents 60-70 % of home wealth.”

Warning in a report on Friday Better growth than expected 6.4 % In May, retail sales were supported a year ago through one -time sales and government subsidies.

China, in the past few weeks, also Alcohol is banned from government meals And it issued strict rules about how much officials could spend on travel-related travel- 40 yuan ($ 5.57) for dinner – Who encouraged the culture of exclusion.

Retail sales are expected to slow to 5.6 % in June of the previous year, according to a Reuters poll. The Chinese National Bureau of Statistics is scheduled to issue data on Tuesday.

Consumption is not the only field of influence. Real estate and relevant industries, such as construction, were once more than a quarter of the Chinese economy.

“Being the largest and most important industry in China for a long time, the amendment of the real estate market has a long -term and deep impact on the Chinese economy,” said Zhu. “The recession of the real estate sector largely reduces the revenue of local financial governments.”

The monetary crisis, in turn, prompted many local authorities to collect more taxes or Find other ways to extract funds from companies.

It is an ideal storm of events that weigh the Chinese economy, even without a commercial war.

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– Anik Bao

In the market

The shares listed on the mainland of China and Hong Kong fell after Trump followed the extension of the deadline on customs duties that will be launched on August 1.

CSI 300 decreased in China by 0.18 %, while Hong Kong Hang Singh Fahras – Which includes major Chinese companies – decreased by 1.11 % from 3:50 pm local time. Data from LSEG showed that the main righteous standard increases by 1.6 % for the year.