SCIO briefing on China's economic performance in August 2025

CNBC:

I have two questions. Following up on the CPI question, the just-released core CPI data for August was the highest since February 2024. Does this signal a turning point for prices? My second question: Some major cities have recently adjusted housing purchase restrictions. Has there been any overall reaction in the real estate market? What is the outlook for the real estate industry? Thank you.

Fu Linghui:

Thank you for your questions. You asked two questions. One is about the change in core CPI, and the other is about the situation in the real estate market.

Regarding the price turning point you're concerned about, generally speaking, determining turning points in economic indicators is quite difficult. Often, we can only confirm a turning point in economic indicators a considerable time after the actual turning point has occurred. This is mainly because the changes in economic indicators are influenced by multiple factors, and short-term fluctuations can mask underlying trends. Regarding the assessment of CPI trends, it should be said that careful analysis is still required. Since the beginning of this year, China's CPI has generally operated at a low level. However, under a series of policies aimed at expanding domestic demand and promoting reasonable price recovery, positive changes have steadily accumulated. As noted earlier, core CPI increased 0.9% year on year in August, expanding 0.1 percentage point from July and marking the fourth consecutive month of growth.

Recent developments show numerous favorable factors supporting a reasonable CPI recovery. First, consumer demand is expected to expand. As the weather turns cooler, food consumption demand will increase somewhat. With the Mid-Autumn Festival and National Day holidays approaching, holiday consumption is also expected to expand, which will help drive the CPI higher. Second, seasonal factors are providing support. As seasons change and new clothing collections arrive, prices may rise modestly from current levels. After the new semester starts, education service demand expands, which will also drive related price changes. Third, "anti-involution" governance efforts are showing results. Recently, efforts to regulate disorderly competition among enterprises in accordance with laws and regulations have driven positive changes in producer prices in related industries. The transmission of production prices to consumer prices also supports CPI recovery. Of course, it should also be noted that domestic market supply remains generally abundant, international energy market price fluctuations may also occur, and the imported inflationary impact on domestic prices carries uncertainty. All of these factors will influence price movements. Therefore, CPI trends require continued monitoring.

Regarding the real estate market situation you asked about, since the beginning of this year, various regions and departments have implemented city-specific policies to stabilize the real estate market. They have continued to roll out policies to halt the market decline and maintain stability, while promoting demand for both basic and move-up housing purchases. Based on the situation over the first eight months, the real estate market experienced fluctuations due to changes in domestic and international conditions. However, the year-on-year decline in commercial housing sales and residential prices continued to narrow, and the effectiveness of inventory reduction remained evident. The real estate market is still moving towards stopping the decline and stabilizing. Recently, some cities have further adjusted and optimized their housing policies, with effects beginning to show as market transactions have improved. In the first eight months, the real estate market showed several key characteristics:

First, the decline in real estate market sales narrowed. Since the beginning of this year, various regions and departments have actively encouraged basic and move-up home purchases, driving the narrowing of commercial housing sales declines. From January to August, the nationwide sales area of newly built commercial housing fell 4.7% year on year, with the decline narrowing by 13.3 percentage points compared to the same period last year and by 8.2 percentage points compared to the whole of last year. Commercial housing sales revenue declined 7.3%, with the decline narrowing by 16.3 percentage points compared to the same period last year and by 9.8 percentage points compared to the whole of last year. Some first-tier and second-tier cities maintained growth in both sales area and sales revenue for newly built commercial housing.

Second, the year-on-year decline in newly built commercial residential property prices narrowed. In August, among 70 large and medium-sized cities, most cities saw the year-on-year decline in commercial residential property sales prices narrow. The year-on-year declines in new commercial residential sales prices narrowed by 0.2 percentage points in first-tier cities, 0.4 percentage points in second-tier cities, and 0.5 percentage points in third-tier cities compared to the previous month. Second-tier and third-tier cities both saw their year-on-year declines in second-hand residential sales prices narrow by 0.4 percentage points.

Third, real estate companies' funding and inventory showed improvement. Efforts to reduce real estate inventory advanced steadily, with companies' funding and inventory conditions showing some improvement. Looking at funding sources, from January to August, funds available to real estate development companies fell 8% year on year, with the decline narrowing by 12.2 percentage points compared to the same period last year and by 9 percentage points compared to the whole of last year. Looking at commercial housing inventory, unsold commercial housing area at the end of August decreased by 3.17 million square meters compared to the end of July, marking six consecutive months of decline.

However, we must also recognize that real estate sales are still declining. The recovery of the real estate market is a process and efforts are still needed to promote its stabilization. Going forward, we must earnestly implement the decisions and arrangements of the CPC Central Committee and the State Council and carry out the spirit of the Central Urban Work Conference. We will conduct high-quality urban renewal, actively build a new model of real estate development, and increase the supply of high-quality housing. We will better meet people's essential needs for a home to live in and their different demands for better housing and promote the stable and healthy development of the real estate market. Thank you.