Suffering badly are consumer sentiment and real estate, two areas entwined because housing prices have tumbled since 2021—including 10% since the start of the year—yet property is where most Chinese put their investments and savings, so the slump is causing a freeze on spending. New home prices in April fell for a tenth consecutive month by 0.6% month-on-month, the fastest decline since November 2014.
“We’re buying basically nothing but food,” said 58-year-old Zhong Weiyi, who owns an auto dealership just outside the sprawling western city of Chengdu. “If property prices start to go back up, then we’ll see,” Zhong said, adding that both he and his daughter own residences with much of the family’s life savings.
China recently unveiled what state media trumpeted as “historic” policies to rescue the housing sector, including wide-ranging measures to boost property prices, asking local governments to buy unsold homes from distressed developers, and easing rules on purchases.
Analysts say one issue that makes some of these steps likely to be as ineffective as previous measures is the fact that local governments are vastly in debt across the country.
Most experts were hopeful but highly skeptical. “It’s a positive and encouraging direction that the governments are stepping in to buy housing inventory,” Larry Hu, chief China economist at Macquarie, wrote in a note. “But in order to evaluate how powerful the impact will be, the key questions are who will be funding the purchase and how much they’ll fund in the end.”