Charting this…
From Jan to May, China’s household added 834.7 billion mid-to-long-term rmb debt.
This is only ~30% of 2021 level (near 3tn), and 40% of 2016 level (2tn rmb). This is the 4th year of decline of newly added debt; it’s only 3% below 2024 level though.
For the full year of 2016 and 2021, China’s household added 5.7 trillion and 6.1 trillion mid-to-long-term rmb debt.
Household’s mid-to-long-term debt is mostly for home buying.
Following the previous near flattish China’s real estate price in February 2025, China is seeing weakening in Apr and May, despite the yoy comparison still looks okay.
Key cities’ MoM existing home price index % change was -0.3% and -0.7% in Apr and May 2025.
The yoy comparison shows decline of less than 2% – existing home price index is only down 1.8% and down 1.3% in Apr and May 2025.
First of all, how large is the gap?
China’s household consumption is 39% of GDP, which is lower than EU average of 52%, 70% in the US, and below world’s average.
That’s about $2.3 trillion (13% x $17.8 trillion 2023 GDP).
Secondly, where are the areas to increase?
If look at GDP composition, China needs to increase in real estate services, healthcare, education, professional & technical services, information & communication, recreation & art, etc.
For real estate services, rent & management fees need to increase…
Healthcare and education is partially public spending. So need more gov budget allocation.
Services is essentially a problem of oversupply right now. Either needs to export or needs to increase demand.
Information & communication.. need to raise software prices.
Recreation & art needs more leisure time.
In China, owners’ imputed rent at market rate was only adopted as of 2023 GDP figure – 2023 GDP upward, among which CNY 1.343 trillion (~1% of GDP) is due to market rent approach vs cost approach.
Some public/government sponsored consumption are not counted as household consumption, such as public schools, healthcare etc. Therefore the split will make household % lower, but this won’t change total GDP figure. These are both valued on cost basis in China and EU.
New home sales is ~60% of China’s home transaction, according to sqft from official stat. (Source: 全年新建商品房销售面积97385万平方米。二手房交易网签面积71812万平方米)
In the US, in 2024, ~700k new home sales vs. 4mn existing home sales. New home sales is ~15% of US home transactions.
60% vs 15%
US existing home inventory is going up to a higher level and month to clear is expected to reach 4.4 month, a slightly higher number.
US new home price is down yoy, but volume was strong. Some explains that “less expensive homes are driving sales activity“.
Homebuilder’s sentiment is running at low levels, while builders reported the average price reduction unchanged from the previous month.
I don’t think so.
In 2024, US trade deficit with China is slightly lower than $300bn.
To compare, in 2011, US trade deficit with China is at the same level.
Back in 2011, US GDP is $15.6 trillion and that grows to $29 trillion in 2024.
We know the math – the trade deficit with China as % of US GDP is almost halved from 2011 to 2024.
Source: US-China trade deficits over the years.
In Feb 2025, the price index of existing home across BJ/SH/SZ averaged is only -1.4% yoy, about flattish.
As of Mar 2025 data, price index of existing home across BJ/SH/SZ averaged has improved for 6 consecutive month (Oct 2024 – Mar 2025), by about 0.44% every month.
The five month from Oct to Feb month has helped the yoy comparison improve 8.6% (from -10% to -1.4%).
Read some interesting discussion on railroad build-outs in early 20th century in China, and its impact on cities.
Before railroads expanded, China’s economy relied a lot of waterways / canals.
Railroads changed the trajectory of cities. Traditional waterborne centers were sidelined and small towns can quickly become new centers, for example,
津浦铁路: Linqing fell; Dezhou rose
京汉铁路: Kaifeng fell; Zhengzhou rose
Additionally, if two railways are built with different standard, they shall create a city, for example,
Shijiazhuang: Zhengtai Railway (metre gauge) intersecting Jinghan line (standard gauge)
Changchun: Chinese Eastern Railway (broad gauge) intersecting South Manchuria Railway (standard gauge).
Overall retail sales dropped 3.3% yoy in the first quarter of 2025 in Beijing, with March dropping 10% yoy.
Auto contributed nearly 2% of the drop (-20% x 10%).
Meanwhile, average spending looks okay – it’s rising 2.3% yoy. It’s a very good number for Beijing actually.
It might be due to the parallel export (?) – people bought cars and export (e.g. Russia).
