80% Collapse_ It’s So Much Worse For China Than We Thought _ China’s Housing Crisis _ ‘Jobpocalypse’

Happy Tuesday, everybody. Welcome to another episode of China Update, where we discuss leading political, economic, and geostrategic analysis on the world's number two economy. My name is Tony. Let's jump in. Today's episode will be very much focused on the economy, looking at several serious structural challenges which the Chinese state faces. Almost half a decade in, and China's crisis-ridden housing sector continues its slow-motion crash, despite directives from the highest levels of government to halt the downturn. New data published yesterday reveals that second-hand home prices fell across all 70 major cities, including the Big Four, for two consecutive months, an unprecedented trend which has never happened since records began in 2011, highlighting the failure of the usually robust autumn sales season to spark a rebound. In October, prices in the four top-tier cities, Beijing, Shanghai, Guangzhou, and Shenzhen, fell by an average of 0.9% from September, according to the National Bureau of Statistics. Beijing led with a 1.1% decline. Second- and third-tier cities also posted widespread drops, with average price contractions of 0.6% and 0.7% respectively. Transaction volume tells a similar story. Existing home sales in Beijing slumped 23.7% month-on-month, while Shenzhen and Shanghai also saw declines. The weakness in the resale market is particularly worrying for policymakers. Unlike new homes, where price caps are often imposed, second-hand properties are seen as a clearer proxy for real market demand. Yet average resale prices in Beijing and Shanghai have fallen 11% and 13% year-on-year, hitting multi-year lows. While new home prices in top-tier cities slipped only 0.3% in October, this masks steep divergences at the city level. Shanghai saw a slight bump in new home prices, but a steep drop in sales. Meanwhile, Guangzhou, also known as Canton in English, experienced the opposite — lower prices, but higher sales volume, highlighting the uneven effects of policy adjustments. Analysts attribute these dynamics to the lifting of price caps on new developments, which allowed nominal prices to rise even as a backlog of older units has flooded the second-hand market. Beyond the numbers, policymakers and economists alike are sounding the alarm over the broader economic implications. Citi's Chief China Economist Yu Xiangrong warned that the sustained slump will likely drag this year's growth below Beijing's near 5% target. Former Finance Minister Lou Jiwei shared a similar outlook at a recent Caixin summit. While he noted that the worst systemic risks have been contained — for now — incredibly, the senior Chinese official cautioned that the transition to a more sustainable property market — that is, to a point where the crisis has ended — will take at least another five years, and requires major structural reforms, and has admitted that the days of high growth are over. Another five years would represent a decade of property crisis. On this theme, prominent China economist for Nomura, Lu Ting, has warned that China's economy is showing signs of strain as weakening exports, a prolonged real estate downturn, and new consumer demand converge. Speaking at a recent investment forum, Lu forecasted that China's GDP growth could ease to around 4% in the coming quarters, down sharply from the 5.2% expansion recorded in the first nine months of 2025. Notably, quarterly growth slowed to 4.8% in the third quarter, signaling a broader deceleration. The downturn is especially pronounced in fixed asset investment, which accounts for roughly 40% of GDP. This metric has been contracting since June, plunging 12.2% in October alone, a drop Lu described as, quote, historically rare, end quote. Retail sales growth similarly weakened, slipping to 2.9% in October, with further deceleration expected. Exports, previously a reliable growth engine, are faltering as well. After five years of robust performance, shipments abroad dropped 1.1% year-on-year in October, and Lu warns annual export growth may average just 2% to 4% in coming years, far below earlier levels. Behind the slowdown lies this deepening property crisis. Sales among the top 100 developers have collapsed up to 80% since 2021, and new home sales fell 40% in recent months. Lu cautioned that efforts to stimulate demand, including consumer trade in programs and curbs on manufacturing competition, risk backfiring. Looking ahead, Lu expects Beijing to pivot toward real estate cleanup and demand-side reforms, drawing parallels to Japan's 1990s bailout strategy, where authorities eventually took action to clean up bad debt following the bursting of a property bubble. But Lu emphasized key differences. Much of China's developer debt is tied to unfinished homes or unpaid bills to contractors, not just financial institutions. Moreover, China's fiscal health is tightly interwoven with real estate, which at its peak contributed nearly 38% of government revenue, largely via land-use sales. This dependency has The property contraction has now dragged on for five years, with a heavy load of legacy debt still circulating. He added that rekindling consumption is critical. More than half of the population, migrant workers, the youth, and flexi-workers will have just ¥244 per month on average after retirement. That is half of the retired population. Next up we have two more important developments to cover, but just quickly, if you want to continue to be on top of all things China, consider subscribing to China Update, hit the bell notification icon and you will be. If you're getting some value from today's episode, it's a huge help if you can just hit that like button and share with someone who you think would also get that sort of value. And if you'd like to help keep China Update financially sustainable, I rely primarily on your support to keep going. Patreon and BuyMeACoffee links are in the description below. Thank you so much everyone for the incredible ongoing support. Next up, China's Shenzhou-20 astronauts Commander Chen Dong, Chen Zhongrui, and Wang Jie safely returned to Earth in recent days, landing at the Dongfeng landing site in Inner Mongolia. Their return marked the successful conclusion of a more than six-month stay at the Tiangong Space Station, China's first long-duration orbital outpost. The trio emerged from their return capsule in good health after a smooth parachute-assisted descent, a welcome ending to a mission complicated by space debris. Originally scheduled to depart on the 5th of November, the Shenzhou-20 crew's return was abruptly delayed when the return capsule was struck by suspected space debris. Tiny cracks appeared in the viewport window, rendering the spacecraft unfit for safe re-entry. In an unprecedented decision, the crew instead returned aboard the newly-arrived Shenzhou-20 spacecraft, leaving the damaged Shenzhou-20 capsule in orbit to continue experiments. The capsule's damage, though minor, shows the growing threat of space debris. In the wake of this debris incident, China swiftly repurposed the Shenzhou-2022 spacecraft, originally planned to launch its next crew in April of 2026, as an emergency lifeboat for the current Shenzhou-21 crew. Preparations are underway at Jiuquan Satellite Launch Center for a launch around the 25th of November. The operation, from identifying the damage to adjusting flight schedules and safely returning the Shenzhou-20 crew, took just nine days, a timeline hailed by Chinese media. The Tiangong Station, fully assembled in 2022, has now hosted nine crewed missions. Though about 20% the size of the International Space Station, Chinese officials are eyeing expansion, with hints of future modules to support longer stays and deeper space missions, as China pushes forward its space ambitions. Just one more arena of competition with the US-led West. And finally for today, despite its outsized influence in global AI development, Chinese startup DeepSeek remains notoriously quiet. It doesn't issue lengthy public manifestos or send its executives to Davos-style summits. The last appearance of CEO Liaowen Fang was in February during a meeting with General Secretary Xi Jinping. So when one of its senior researchers steps forward with a stark warning for the Chinese public, the country should take note. Last week, at a convention, DeepSeek's Chen Deli cautioned that AI-driven automation could soon upend the labor market, wiping out most jobs and, quote, shaking society to its core, end quote. He called on tech firms to act as whistleblowers, sounding the alarm on roles most at risk. While Western leaders have long warned of white-collar job losses, in China the crisis is immediate. Youth unemployment, underemployment, and job mismatch has already become defining social challenges. The numbers are grim. Youth joblessness briefly hit 21.3% in 2023, prompting authorities to halt production before resuming under a revived methodology. Even then, unemployment reached 18.9% in August. That gap between official statistics and public despair is widening fast, as seen in national outrage over highly competitive job recruitment and visa policies perceived as undermining domestic workers. DeepSeek's warning lands at a pivotal moment. Beijing's AI Plus initiative aims to deploy artificial intelligence across industries to propel growth and offset demographic decline. But without stable jobs, even the most innovative AI-powered consumer offerings will struggle. The more uncertain the economic outlook, the more households choose to save, dampening the very consumption the government hopes to stimulate. China's leaders must act swiftly. Ignoring the societal impacts of AI in favor of rapid deployment risks backlash, and a threat not just to economic growth, but to the social stability that underpins it. Okay, that is today's episode of China Update. Thank you so much everybody for watching. Have a good Tuesday, and I hope to see you for the next episode, which will either be tomorrow or on Thursday.