Illustration: Sarah Grillo/Axios
China's rise to global economic powerhouse was propelled in part by a historic property boom. Now, a yearslong housing crisis keeps dragging the economy down — a notable reversal in the economic dynamics between the China and U.S.
Why it matters: China's government stimulus measures to shore up its property sector have yet to produce results. Efforts to offset that pain by boosting manufacturing and exports face intense pushback from other global powers, such as the U.S.
- It puts China's post-pandemic recovery further out of reach. That might restrain the nation's economic influence that once appeared unshakeable.
The latest: New economic data shows lingering trouble for China's housing market.
- New home prices fell nearly 4% in May compared to a year earlier, worsening from the 3% slide seen the prior month. On a monthly basis, the home price decline was the worst in almost a decade, according to calculations by Reuters.
- In the first five months of the year, property investment dropped 10% from a year ago.
The big picture: Chinese officials last month announced a slew of measures to rescue the housing market by ginning up demand and soaking up supply. That included removing minimum interest rates on mortgages and letting local governments buy up unsold properties.
- "Despite the recent round of housing easing, property-related activity remained depressed in May," economists at Goldman Sachs wrote Monday.
- The data shows that "continued policy easing is still necessary, especially on the demand side and in the property market," they added.
The intrigue: To the dismay of officials in the U.S., Europe and elsewhere, China is leaning on export-led growth — particularly of heavily subsidized clean energy products — to boost its economy. But that, too, cooled off last month.
- Industrial output rose 5.6% from a year earlier — down from the near 7% pace in April and below what economists anticipated.
What to watch: China's manufacturing strategy is facing more backlash around the world, threatening to escalate a global trade war.
- Europe last week became the latest to try to restrain imports of Chinese electric vehicles.
- The EU Commission said it was upping tariffs because the cars amounted to a "threat of economic injury" to Europe-based electric car makers that can't compete with the "unfair subsidization" of these Chinese vehicles.
- The U.S. slapped higher tariffs on Chinese EVs last month, a largely preventative action since essentially no Chinese-made cars are sold in the U.S.
The bottom line: There was a lone — though slight — bright spot for China's economy last month: signs that consumers may finally be picking up spending.
- Retail spending increased 3.7% compared to a year ago, up from the previous month.
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