There's 'no chance' China's property market rebounds to what it was, researcher says

• There's "no chance" China's property sector rebounds, a researcher from the Eurasia Group told Bloomberg.
• China's real estate sector was once 25% to 30% of the country's GDP, and "there's not really any sector that can fill in that gap."
• Sluggish Chinese imports from Western nations are only a part of what's behind the economy's weakness.

Back in 2021, China's real estate sector went topsy-turvy — and according to one researcher, it's never going to go back to its halcyon days.

"The property market contributes about 10% of China's GDP," Anna Ashton from the Eurasia Group told Bloomberg. "There's not really any sector that can fill in that gap, and there's no chance of the property market rebounding to what it was before."

In its heyday, China's real estate sector contributed anywhere from 25% to 30% of the country's GDP. Then real estate behemoth Evergrande defaulted on its debt, tipping the dominoes for a prolonged financial mess. Economic growth has struggled to bounce back after the pandemic, the stock market has tanked, and foreign investors are fleeing.

Western countries like the US have also been decoupling from Beijing, and the effects can be seen in the weak hiring in the manufacturing sector, Ashton said. Weak hiring leads to weak wage growth, which leads to weak consumer demand, Ashton explained. But that's only a part of the picture. 

"It's bigger than just the lack of demand from developed markets that normally would be spending more on Chinese imports," Ashton said, citing weakness in the services and construction sectors as well.

Beyond its real estate woes, politics also has a role to play in the economic malaise.

"There's this continued tension between emphasizing national security and emphasizing economic growth that creates confusion for businesses," Ashton said. "And it's also helping the continuing weak consumer demand."

Just last month, China's crackdown on the video gaming industry sent stocks into a tailspin. Companies like Tencent, NetEase, and BiliBili, a video-sharing site popular with gamers, lost over $80 billion in market value on the same day, spurring a hasty patch-up measure from the government.

And China now has another headache to deal with: deflation. In its fourth month of decline, consumer prices have fallen at the fastest pace since 2009, with the latest CPI print dropping 0.8% in January.