Per official stats, investment in real estate development plummeted by 11.2 per cent in the first half of 2025, a steeper decline than the 10.6 per cent drop for the entirety of 2024. This casts a shadow on Premier Li Qiang’s optimistic pledge at a July State Council meeting to consolidate and expand the positive momentum of economic recovery.
The worsening state of real estate once again raises questions about whether China’s leadership will – or should – intervene.
The malaise in the sector is hardly news, but its implications remain profound. Leaving aside the impact on fixed-asset investment, the property and construction industries directly employ over 50 million people, a figure that excludes millions more in upstream and downstream industries like construction materials, home decoration and real estate brokerage. The downturn exerts direct pressure on income growth, disproportionately affecting vulnerable groups like migrant workers, who form the backbone of construction labour.
It also strikes at the heart of China’s macroeconomic challenges. Land sales have dried up, creating gaping fiscal shortfalls across provinces. Liquidity-starved developers are struggling to repay loans, feeding a rise in non-performing assets across China’s financial system. Perhaps most critically, with around 70 per cent of household assets tied up in real estate, falling home values weigh heavily on consumption and confidence.
The slowdown has even affected global commodity markets. China’s property sector accounts for a quarter of its steel demand. As demand contracts, producers are forced to push excess output overseas, compounding international concerns about Chinese overcapacity.
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