China property stocks pare drop on Xi's urbanization plan

China property stocks pare drop on Xi's urbanization plan

Chinese property stocks experienced a significant drop on July 2, 2025, following reports that President Xi Jinping's urbanization plan may not include the anticipated measures to support the real estate sector. The market had been buoyed by speculation that a high-level meeting would be held to revive the struggling property sector, reminiscent of the 2015 Central Urban Work Conference [1].

The Bloomberg Intelligence index of Chinese real estate stocks surged as much as 11% on July 1, with shares of Logan Group Co. and Sino-Ocean Group Holding Ltd. leading the way. However, the rally was short-lived as the market reacted to the news that the government may not have enough funds to support the development of shanty-town areas [1]. Shujin Chen, head of China financial and property research at Jefferies Hong Kong Ltd., stated that while such a resumption is unlikely, the market had been betting on a 2015 playbook approach to stimulate the sector [1].

The broader market also experienced a pullback, with the Shanghai Composite Index closing at its highest level since January 2022. The nation's 10-year government bond rose one basis point to 1.66%, and iron ore futures jumped as much as 3.6% in Singapore [1]. The market's initial optimism was fueled by expectations that the government would follow the 2015 playbook, which included measures such as speeding up new home construction, offering monetary payouts to families, and pumping more money into smaller cities [1].

However, the recent news from the National Development and Reform Commission (NDRC) and the Beijing Municipal Government may have dampened these expectations. The NDRC emphasized the importance of following trends and leveraging the current strong urbanization momentum to implement four high-quality actions supporting Chinese modernization. The Beijing Municipal Government also mentioned optimizing new housing supply and studying the "mortgage transfer" policy for individual housing loans with the housing provident fund [3].

The Chinese property sector has been mired in a protracted slump, with several major developers defaulting on their debt due to government crackdowns and faltering home-buyer sentiment. Despite officials' efforts to revive the sector, these measures have so far had only modest success. Home sales extended their slump in June, spurring calls for fresh stimulus [1]. China Vanke, one of the country's largest property developers, reported a preliminary net loss for the first half of 2025 of 10 billion yuan to 12 billion yuan, underscoring the lingering problems in the nation's property market [2].

Investors and financial professionals should closely monitor the developments in China's urbanization plan and the government's response to the ongoing slump in the property sector. The market's reaction to the recent news indicates that there is significant uncertainty surrounding the potential measures that the government may take to support the sector.

References:

[1] https://finance.yahoo.com/news/chinese-property-stocks-jump-unverified-080105039.html
[2] https://www.businesstimes.com.sg/property/china-vanke-says-first-half-loss-may-widen-us1-67-billion
[3] https://news.metal.com/newscontent/103421147/The-real-estate-market-policy-has-been-frequently-favorable-with-some-real-estate-companies-achieving-outstanding-performance-The-real-estate-sector-led-the-gains-with-stocks-such-as-China-Fortune-Land-Development-hitting-the-daily-price-limit-[SMM-News