The latest official data released by the Chinese Communist Party (CCP) shows that China’s new home prices fell by 5.9% year-on-year in October, marking a 16-month continuous decline. However, the month-on-month decline narrowed. Real estate development investment also dropped by 10.3% year-on-year, further exacerbating the decline.
Experts analyze that the Chinese economy remains weak, with the real key being the lack of confidence in the market. The effectiveness of the CCP’s series of policies to rescue the real estate market remains limited, as the economy has been stagnating for 3 to 4 years. With the return of Trump, Beijing is at a loss on how to deal with it, painting a less optimistic outlook.
According to the National Bureau of Statistics of China, the year-on-year decline in new home prices in October expanded from 5.8% in September to 5.9%, marking a continuous 16-month decline. Industrial value added for enterprises above a designated size in October increased by 5.3% year-on-year, lower than the market’s expectation of 5.6%, with a 0.1 percentage point decrease from September. The statistics agency believes these data could indicate a potential shift in market sentiment.
Based on official CCP data, the rate of decline in new home prices compared to the previous quarter narrowed from 0.7% in September to 0.5% in October, marking the smallest decline since March this year, showing a visible moderation in the contraction.
Reuters mentioned on Friday (15th) that official data shows an improvement in consumer spending in China in October, but industrial value added growth continues to slow down. The judgment on whether the overall economic weakness caused by the decline in the real estate market has significantly improved is premature. Trump’s imminent return to the White House casts a shadow on China’s economic recovery, adding more variables and uncertainties.
Wang Guochen, a researcher at the Chinese Academy of Economic Research Mainland Economics Institute, told Epoch Times that according to official CCP data, there is indeed a rebound in consumer spending and a slight rebound in industrial value added. However, apart from these factors, the overall investment momentum in the economy remains stagnant. In general, the real estate sector has not shown significant improvement due to the recent round of stimuli, as the overall effect is limited.
The prolonged stagnation of China’s real estate sector has seriously weighed down its economy. The CCP has recently introduced a series of policies aimed at promoting the revival of the real estate market, including increasing credit for “white list” projects to 4 trillion RMB, implementing the renovation of 1 million sets of urban villages and dilapidated houses, and reducing interest rates on existing housing loans.
However, Wang Guochen stated that according to official data, 90% of large cities in China still experience falling house prices. Looking at the financial aspect, real estate development investment continues to decline. The average prices in 70 major cities are also falling, hitting historic lows repeatedly. Sales in the real estate sector have only shown a slight recovery.
Taiwanese political and economic commentator Wu Jialong also told Epoch Times that the Chinese economy remains weak, and the key issue is not the effectiveness of short-term stimulus measures but the lack of market confidence, indicating a crisis of confidence.
“The second point is whether the policies or stimulus measures introduced by the government can gain market trust. If the national policies keep changing, and after two or three years you have to cut them off, who would dare to enter?,” he questioned.
Wu Jialong emphasized that without credibility in the government’s policies, not only developers but also investors may be hesitant to enter the market. Though there are short-term fluctuations in the data, reversing the trend in the real estate sector requires the ability to inject funds on both the homeowners’ and developers’ sides, offering a better chance of closing deals.
He also noted that surface-level data from China is usually inflated, making accurate analysis difficult.
Official data further reveals that fixed asset investment in the first ten months of this year increased by 3.4% year-on-year, lower than market expectations.
The most concerning factor is the decline in real estate development investment, which fell by 10.3% year-on-year, with the drop widening. Housing construction area also decreased by 12.4%. Sales of new commercial housing and area saw double-digit declines year-on-year, dropping by 20.9% and 15.8% respectively, while residential sales fell by 22% and 17.7%.
Wang Guochen believes that the country’s economy has been in a state of stagnation for 3 to 4 years now, so any recovery will be limited. He further explains that the focus on the real estate market has shifted from the average nationwide level to analyzing first and second-tier cities separately. Although efforts have been made to rescue first-tier cities and high-end properties, the results remain limited.
He elaborated that the economy of Mainland China is now at a standstill, with no real positive prospects. The monthly minor rebounds are essentially fleeting, creating only momentary relief.
With the Chinese economy still fragile, and Trump poised to return to the White House, the impact on tariffs could be severe. Wang Guochen mentioned that if Trump imposes tariffs ranging from 60% to 100% on Chinese products, China will find it difficult to handle. EU is also facing 10% to 20% tariffs from Trump, and they have already planned countermeasures. However, there has been no mention of Beijing planning any countermeasures.
“If Trump imposes a 60% tariff, a confident response would be to retaliate with an equivalent 60%! But Beijing doesn’t even dare to consider a minimal response. In recent years, Beijing has been advocating nationalism and facing challenges, leading to its own predicament.”
Looking ahead, in order to negotiate effectively, China currently lacks a representative figure like Liu He, the Vice Premier and a member of the Political Bureau of the CCP Central Committee, who is not only a Harvard graduate fluent in English but also a proficient economist. Now, there seems to be a lack of similar authoritative figures for negotiations.
Regarding an article in the People’s Daily stating that confidence in achieving the target of around 5% economic growth in China this year is increasing, Wang Guochen believes that the future may not be as optimistic. According to estimates from 26 institutional entities, China’s GDP might reach 4.5% next year. Should Trump return and impose a 60% tariff, this could potentially reduce China’s GDP by 1.5%. Meaning, even after deducting 1.5%, China’s GDP in the coming year will only be 3%. If tariffs increase further beyond 60%, China’s GDP may not even reach 3%, leaving both internal and external concerns looming large.
Wu Jialong’s view is that structurally, China still requires foreign markets to absorb excess production capacity, making it unreasonable to stir up tensions with its major buyer, the United States.