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China’s property slump could hinder growth 5 more years: ex-finance minister

Lou Jiwei says real estate is an unlikely source of systemic risk, but proactive policy is necessary to counteract its drag on the economy

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China’s former finance minister Lou Jiwei at an event in 2016. Photo: Simon Song
Carol Yangin Beijing

The slump in China’s property market has not yet bottomed out and will continue to be a drag on economic growth, former finance minister Lou Jiwei warned, calling for expansionary fiscal and monetary policies as well as structural reforms to counteract the sector’s persistent headwinds.

While Lou said real estate is unlikely to be a source of systemic risk – a source of concern after China’s largest developers faced rolling liquidity crises that left many homebuyers without the flats they had paid for – he added the sector will continue to frustrate the country’s growth picture as it undergoes a transformation that could last about five years.
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Policymakers have pushed to phase out the industry’s controversial presale system and ensure home deliveries in recent years, but “the pace can be accelerated”, Lou said at the 2025 Caixin Summit in Beijing on Friday.

The downturn in the property market has dampened consumption growth and reinforced deflationary pressures, meaning “expansionary fiscal and monetary policy will be needed for some time”, the former finance minister said.

However, he emphasised that greater output and investment should not be the only target, calling instead for structural reforms, particularly to the hukou – the household registration system that restricts mobility and limits access to public services for rural migrants in cities.

By linking education, healthcare and pensions to the hukou, the system is widely regarded as a driver of disparities between urban and rural areas.

Nearly 300 million rural migrant workers currently live in cities without local hukou, which limits their access to essential services, he said.

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Reforming the system to allow freer movement would spur demand for home purchases and rentals, significantly boosting the property market, he said. Still, he admitted, such reforms would be “extremely difficult”, as they would affect the interests of local governments.

Lou reiterated his long-standing call for implementing a national property tax at an appropriate time, a proposal first floated about 12 years ago. The legislative groundwork was laid around 2022, but the tax was delayed due to economic pressures, particularly during the pandemic, he said.
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