The Chinese housing market continued to show signs of weakness during last August, with new home prices declining for the third month in a row, in an indicator that reinforces fears that the real estate sector remains one of the most prominent sources of pressure on the second largest economy in the world.
Calculations showed; Based on data from the National Bureau of Statistics, new home prices decreased by 0.1 percent during August compared to last July, which is the same percentage recorded in the previous two months. On an annual basis, prices fell 3 percent, compared to a 3.2 percent decline in July, the slowest pace of decline this year.
The slowing pace of the annual decline indicates a degree of stabilization, but it is not yet the beginning of a broad recovery. Zhang Dawei, chief analyst at the real estate agency Centaline Property, said that the year-on-year price decline has become less severe in various categories of cities, suggesting that the market may have passed the peak of pessimism, but he ruled out a rapid recovery nationwide.
The data showed a clear contrast between major cities and smaller markets. New home prices in first-tier cities rose 0.1 percent on a monthly basis, ending a series of previous declines, while second- and third-tier cities continued to record declines. Home resale prices in major cities also improved slightly; This helped real estate companies' stocks compensate for their early losses.
However, the broader picture remains weak, as real estate sales, investments and new construction starts fell sharply during the first eight months of the year.
Pressure on consumption and credit
The continuing housing crisis represents a double burden on the Chinese economy. On the one hand, the decline in real estate prices weakens the confidence of families, a large proportion of whose wealth is concentrated in housing, and on the other hand, the decline in real estate activity puts pressure on the revenues of local governments that have historically relied on land sales. The effect of this also appears in credit. Household loans, including mortgages, decreased by about 202.9 billion yuan, or about $30.2 billion, last August, after a larger decline of 460.3 billion yuan in July. These numbers reflect the continued reluctance of families to borrow, despite the measures taken by the authorities to encourage demand.
Limited support measures
Last month, Beijing launched a new set of measures aimed at rebuilding confidence in the sector, including gradually pushing developers away from the model of pre-sale of housing, which sparked buyers’ dissatisfaction after projects they paid for were halted during the sector’s crisis. The financial authorities also extended the maximum term for personal real estate loans to 40 years instead of 30 years, in an attempt to reduce the monthly burdens on buyers and stimulate demand. But analysts believe that these measures may be more effective in reducing risks in the long term than in stimulating home sales quickly.
Zhang said that the market's ability to record further improvement will mainly depend on the return of buyer confidence, the emergence of real demand for housing, and the success of local governments in implementing stabilization policies.
The real estate data comes at a time when the Chinese economy has lost some momentum. Growth slowed to 4.3 percent during the second quarter, while more recent indicators indicate that China continues to rely heavily on exports and the industrial sector to compensate for weak domestic consumption and investment.
Oxford Economics believes that the real estate crisis may be more prolonged than expected. Chief Economist Sheana Yu said the foundation expects the housing stagnation to continue throughout the current five-year plan period, with residential investment not returning to growth before 2031.
The corporation lowered its forecast for the growth of the Chinese economy in 2027 to 4.3 percent, noting that the continuation of the real estate crisis will keep growth weak even with increased government investment. This scenario puts more pressure on policymakers to provide stronger support for domestic demand. Although the pace of price decline has begun to slow, the sector has not yet regained its ability to support consumption and investment.
For Beijing, the challenge is no longer limited to halting the decline in house prices, but rather rebuilding confidence among families and developers, and turning limited stability in major cities into a broader recovery that can reduce the economy’s dependence on exports and industry.
Official data showed on Tuesday that oil refining rates in China rose for the second month in a row in August, supported by strong fuel exports after Beijing eased export restrictions in mid-July.
High oil prices during the Iran war, coupled with restrictions on fuel exports to protect domestic supplies, have reduced China's oil consumption and pushed refinery operating rates to levels similar to those recorded during the Covid-19 pandemic in June.
China processed 59.07 million metric tons of crude in August, equivalent to 13.91 million barrels per day, an increase of 11.2 percent from July, but it remains 6.9 percent less than the same period last year, according to data issued by the National Bureau of Statistics on Tuesday.
Emma Lee, an analyst at Vortexa, said, according to Reuters: “Crude refining operations are receiving support from exports, and this situation is likely to continue in the coming months, as higher oil prices will only curb domestic demand.”
The data also showed that China's domestic production of crude oil in August increased by 0.8 percent on an annual basis, reaching 18.43 million metric tons, or 4.34 million barrels per day.
Beijing does not publish information about its reserves, but Reuters calculations - which combine official crude imports with domestic production and subtract the amounts of oil processed by refineries - showed a decrease in stocks by 639 thousand barrels per day in August. It is the second largest decline since the start of the Iran war, after a decline of 936 thousand barrels per day in June.
Analysts pointed out that Chinese crude stocks are sufficient to protect domestic supplies from any disruptions in imports. However, restrictions on exports of refined petroleum products may be imposed again if the situation in the Middle East escalates further.
In terms of supplies, seaborne crude oil shipments to China are expected to continue their recovery during the months of September and October, reaching about 8 million barrels per day - assuming no further disruptions - according to Vortexa data.
Although the volume of shipments expected to arrive in November and December is still uncertain, Vortexa indicated that refiners have abundant reserves of crude in onshore facilities, which provides protection against any disruption to marine supplies.
“Using stocks to ensure domestic supplies is not a problem, but relying on them to boost exports is not sustainable,” said Li, the Vortexa analyst. Therefore, state-owned refining companies are still seeking to buy crude to support increased exports, in light of the continued strength of export profit margins.”
According to Vortexa, if government facilities raise withdrawal rates from the stock to one million barrels per day, the accumulated stocks since 2025 are likely to suffice until approximately the end of the current year.
“Following the attacks on the Saudi East-West oil pipeline and the risk of further escalation in the Strait, new restrictions on fuel exports may be imposed any time after October,” said Yi Lin, vice president at Rystad Energy. He added: “If the Chinese government makes energy security its top priority, it should stop exports. If refining margins and the economy are still a priority, exports must continue.”
Processed oil and gas
Official data showed that the volume of oil processing during the first 8 months amounted to 456.12 million metric tons (i.e. 13.7 million barrels per day), a decrease of 6.6 percent from the previous year, while crude oil production reached 146.39 million metric tons, an increase of 0.9 percent compared to the same period last year.
Natural gas production in August rose by 0.8 percent year-on-year to reach 21.4 billion cubic metres.
Total production from the beginning of the year until then reached 175.7 billion cubic metres, an increase of 1.1 percent compared to the same period of the previous year.
Chinese factories in August provided a new signal of the high-tech sector's ability to support the world's second-largest economy, after industrial production growth accelerated driven by demand related to artificial intelligence and advanced equipment. But the opposite picture seemed less optimistic, with consumer spending slowing, investment contraction worsening, and the real estate crisis continuing, revealing a widening gap between the strength of the supply side and weak domestic demand.
Data from the National Bureau of Statistics showed that industrial production rose 5.2 percent year-on-year in August, accelerating from 4.5 percent in July, and exceeding market expectations of 4.8 percent. The performance was particularly supported by the equipment and advanced technology industries, in reflection of the government strategy aimed at shifting more resources away from real estate and traditional industries, and towards artificial intelligence, chips, robotics and high-value manufacturing.
Poor consumption
But the strength of factories did not transfer with the same momentum to Chinese consumers, as retail sales rose only 0.4 percent year on year, slowing from 0.6 percent in July, and below expectations for a 0.8 percent increase.
The data confirms the continuation of one of the most prominent challenges facing Beijing; It is China's ability to produce and export increasing quantities of advanced goods, while not achieving a similar recovery in household spending.
Weak consumption and the real estate crisis contributed to the slowdown in GDP growth to 4.3 percent in the second quarter, which is the slowest rate in more than 3 years, and below the lower end of the target range for annual growth of between 4.5 and 5 percent. Lin Song, chief economist for the Greater China region at ING, said that unless an unexpected strong improvement appears in September, the economy's growth is likely to remain weak during the third quarter.
Oxford Economics also lowered its forecast for China's growth in 2026 to 4.6 percent, and reduced its estimates for next year to 4.3 percent from 4.6 percent previously. Chief Economist Sheana Yu attributed the adjustment to the expectation that the real estate crisis will continue for a longer period, keeping growth under pressure even with increased public investment.
Investment is declining
Investment data was more clear in expressing the state of weakness. Investment in fixed assets, which includes infrastructure, real estate and corporate projects, fell by 7.2 percent during the first eight months of the year, the largest decline since April 2020. The real estate sector was at the heart of the decline; Investment in it fell by 19.9 percent compared to the same period last year, while new home prices continued to decline, indicating that the prolonged crisis in the housing market is still far from over. The repercussions of real estate are not limited to construction activity; The decline in house prices affects household wealth and confidence, and limits their willingness to increase spending, while companies in turn hesitate to expand their investments in light of weak demand.
Artificial intelligence creates a gap
On the other hand, technology-related industries continue to provide one of the most powerful drivers of the economy. Investment in high-tech industries grew by 5.2 percent during the period from January to August, benefiting from a global boom in spending on artificial intelligence and data centers.
Lithium-ion battery production jumped 57.2 percent year on year, while industrial robot production increased 34.6 percent. The boom coincides with a strong expansion in Chinese exports of high-tech products and components related to artificial intelligence infrastructure, giving the economy an important source of growth in the face of a weak domestic market.
But at the same time, these successes reveal a growing imbalance in the structure of growth. Large investments in advanced industries have not yet translated into corresponding improvements in household incomes or job security. The urban unemployment rate rose to 5.3 percent in August from 5.2 percent in July, reinforcing concerns about the ability of industrial transformation to create jobs at enough speed and scale to support consumption.
Real estate and credit
Weakness is also evident in credit activity. Although new bank loans returned to positive territory in August, they were far below analysts' expectations after the record contraction recorded in July. The numbers indicate that the abundance of liquidity alone is not enough to stimulate activity when households remain conservative towards borrowing, and companies are reluctant to launch new investments.
During August, the economy was also exposed to the effects of severe weather conditions, after four hurricanes struck China and disrupted activity in important industrial and logistical areas on the east coast. These domestic pressures coincide with a more difficult external environment, including rising oil prices due to the Middle East conflict, and continuing high global borrowing costs.
Additional support
Fu Linghui, spokesman for the National Bureau of Statistics, said the external environment remains “complex and full of challenges,” while structural adjustment pressures persist within the economy, requiring continued efforts to stabilize the growth path. Beijing has responded so far by accelerating government bond issuance and expanding loan interest subsidies directed at small private businesses and consumers. The central bank also pledged to provide further support, without giving an explicit indication of an imminent reduction in key interest rates or the mandatory reserve ratio for banks.
But economists believe that the main problem goes beyond the cost of financing. Barclays analysts said that policymakers' reluctance to launch a more aggressive package targeting consumption may prolong the rebalancing process.
The August data thus highlight the current paradox of the Chinese economy: a clear success in building an advanced industrial base capable of competing globally, matched by internal demand that is still unable to catch up with it. While exports and artificial intelligence give Beijing room to continue to grow, a more sustainable recovery will ultimately depend on the ability of policies to restore confidence to consumers, stabilize real estate, and turn factory success into stronger incomes and spending within the economy.
