China's Property Slump Threatens Economic Growth for Years

The slump in China's property market is expected to hinder economic growth for up to five more years, according to former finance minister Lou Jiwei. He indicated that the downturn is not yet at its bottom and will continue to exert pressure on the economy.

Lou emphasized the necessity for expansionary fiscal and monetary policies, coupled with structural reforms, to mitigate the sector's persistent challenges. Although he noted that real estate is unlikely to pose a systemic risk, given the liquidity crises faced by major developers, he warned that the sector will continue to impact the nation's growth trajectory.

Policymakers have been attempting to phase out the controversial presale system and ensure timely home deliveries, but Lou suggested that the pace of these reforms should be accelerated. The property market's decline has negatively affected consumption growth and intensified deflationary pressures, indicating that expansionary policies will be required for an extended period.

Furthermore, Lou called for structural reforms, particularly regarding the hukou system, which restricts mobility and limits access to public services for rural migrants in cities. By linking education, healthcare, and pensions to the hukou system, it is seen as a contributor to the disparities between urban and rural populations in China.

This ongoing situation presents significant risks for investors and businesses navigating the complexities of the Chinese market, as they must consider the long-term implications of a weakened property sector on overall economic health.

As highlighted in the South China Morning Post, Lou Jiwei's insights at the 2025 Caixin Summit underscore the urgent need for policy adjustments to address these challenges.