The Chinese Communist Party typically holds its annual Central Economic Conference before mid-December each year to review the economic situation throughout the year. This conference has always been seen as a window to observe how the authorities will tackle economic challenges in the coming year. Currently, it is believed that at least four major crises have emerged before this important meeting.
According to CNBC’s The China Connection newsletter, Edward Chan, Managing Director of S&P Global Ratings, stated, “Homebuyers’ confidence is already fragile. Once leading real estate companies need to seek ‘troubled financing,’ national sales sentiment will be further dampened.” As of October this year, monthly nationwide sales were still 653 billion yuan lower than the average in 2024, indicating that “the downward trend has not yet bottomed out,” and uncertainties remain in the pace of policy implementation.
Goldman Sachs’ latest research report shows that nationwide new home sales in November fell by 20%-30% year-on-year, much weaker than the same period last year. Institutions forecast that the possibility of a new round of relaxed real estate policies is rapidly increasing.
A report released on December 1 by the China Index Research Institute stated that based on the China Real Estate Index System’s survey data on new and second-hand housing sales in 100 cities nationwide and the rental market in 50 cities, the average price of second-hand houses in a hundred cities in November was 13,143 yuan per square meters, a decrease of 0.94% compared to the previous month. The report indicated that due to the impact of high inventory levels and weak expectations, the downward pressure on second-hand house prices has increased.
In terms of city size, in November, second-hand house prices in first-tier, second-tier, and third to fourth-tier cities in China decreased by 1.15%, 0.98%, and 0.81% respectively compared to October. They also dropped by 5.62%, 8.24%, and 7.47% respectively compared to the same period last year, showing wider declines both monthly and annually compared to October.
It is generally believed that second-hand house prices, as direct transactions based on real sources in the current market environment between buyers and sellers, more accurately reflect the market’s supply and demand relationship, buyers’ confidence, and economic conditions.
Another Chinese real estate research institution, Ke Rui, stated in a publication on November 28 that land transaction volumes and amounts in November increased by 39% and 57% respectively compared to October, but decreased by 27% and 28% respectively compared to the same period last year.
The Chinese real estate industry has been under pressure throughout the year, with the latest focus now on the cash flow pressure faced by leading real estate company Vanke.
On December 1, real estate giant Vanke’s two bonds were temporarily halted due to a more than 30% intraday decline. At the same time, Vanke proposed a one-year extension of a 2 billion yuan bond. This move led to a downgrade by S&P and raised concerns in the market.
After the “Five-Year Plan” meeting at the end of October, the senior Chinese Communist Party officials have started to emphasize the goal of “expanding consumption” more prominently. Recently, six ministries jointly issued a plan for the development of the consumer industry, covering multiple industries such as electronic products and sports equipment, and set the target of at least three industries to reach trillion-scale by 2027.
However, analysts outside the government believe that while the official plan emphasizes upgrading the supply side, there is a lack of financial arrangements and implementation pathways. True support for consumption requires improvements in employment and income growth, which have been the weak points in this year’s economy.
Chinese enterprises are caught in intense price competition. Despite the extension of the largest shopping festival “Double 11” to 40 days, it only recorded a growth rate of 14.2%, far lower than last year’s 26.6%.
During this year’s “Double 11,” many e-commerce platforms extended promotional periods and stopped disclosing the total transaction value, emphasizing structural highlights such as order quantity and the number of shoppers. Experts believe this change reflects deep-seated economic issues like soft domestic demand and insufficient consumer confidence in the Chinese market.
Sun Guoxiang, a professor at the Department of International Affairs and Business at South China University of Technology, described the current situation as “consumer shock” (indicating a significant slowdown in consumer activities). He recently told a media outlet: “The growth rate of online sales is slowing down, which is a classic scene of deflation where prices go down, and confidence follows suit. When consumers are spectators even during the most impulsive consumption festival, it indicates that the market’s heat has long dissipated.”
In October 2025, China’s core Consumer Price Index (CPI), excluding food and energy prices, recorded a 1.2% increase, but it still failed to boost confidence.
Nomura’s Chief Economist for China, Lu Ting, recently pointed out that the sharp rise in gold prices contributed 0.3 percentage points to the October core CPI inflation rate of 1.2%. The demand by Chinese investors for gold-related products should be classified more as investment rather than consumption. Excluding gold, China’s CPI inflation rate remains negative, in line with the overall economic slowdown trend since mid-year.
China’s long-term government bond futures have significantly weakened, with obvious redemptions seen in fixed income funds. According to Bloomberg’s data, China’s 30-year government bond futures fell 1.1% at one point intraday, dropping to the lowest level since November 2024. At the same time, the yields on 10-year and 30-year government bonds increased simultaneously.
Bloomberg reported on December 4 that this indicates a cautious and uneasy overall market sentiment ahead of the critical Central Economic Work Conference. Traders are maintaining high vigilance: with doubts emerging regarding the strength of policy support for economic growth and whether stock market momentum can continue into 2026, the demand for hedge assets is weakening.
Additionally, the market is concerned that rules related to the reform of public fund fees might be introduced, potentially putting pressure on demand for assets including government bonds.
As of December 2, the issuance scale of local government bonds by the Chinese authorities has exceeded 10 trillion yuan. This is the first time in history that the annual issuance scale of local government bonds has surpassed 10 trillion yuan.
A report by Nikkei Asia stated that this is the first time in history that the issuance of local government bonds has exceeded 10 trillion yuan, closely related to the decline in revenue from land transfers by local governments.
From January to October this year, the total revenue from land transfers by local governments in China was slightly below 2.5 trillion yuan, while the land transfer revenue for 2021 exceeded 8.7 trillion yuan for the whole year.
According to a commentary by Professor Wen Laicheng of the Central University of Finance and Economics quoted by Caijing on December 2, in recent years, the scale of local government bond issuance has been increasing rapidly, with the current balance of local government debt already exceeding 50 trillion yuan. Wen Laicheng believes that attention should be paid to the rapid growth of debt and its challenge to the long-term sustainability of local finances.
On September 12, the Chinese Minister of Finance, Lian Fu’an, stated that by the end of 2024, the hidden debt of local governments had reached 10.5 trillion yuan. However, Chinese data is often criticized for being concealed, and foreign media have reported that local hidden debts of the Chinese Communist Party could reach as high as 60 trillion yuan.
Dagong Global Ratings mentioned in a publication on December 2 that in 2024, China’s comprehensive debt repayment-to-earnings ratio for a 15-year period was only 0.42. This means that the EBITDA of local government financing platforms (LGFVs) cannot cover the funding gap of around 34 trillion yuan without refinancing and government support. Currently, only about 30% of the debt replacement capacity can solve the gap, leaving approximately 24 trillion yuan of unfunded gap unresolved.
Nikkei Asia analyzed that the situation of local Chinese debt has entered a dangerous phase. Structural imbalances such as declining land income, opaque financing of local government financing platforms, and weak nominal GDP growth are intensifying. China could be caught in a long-term debt spiral, which may hinder the achievement of its development goals and shake the confidence of global investors in China.