The Kobeissi Letter highlighted key housing market trends for the end of the second quarter, stating:
“China’s new home prices fell 0.3% in June MoM, marking the steepest monthly drop in 8 months. Year-over-year, new-home prices in 70 cities plummeted -3.2%, posting the 24th consecutive monthly decline. Second-hand home prices fell 0.6%, the biggest drop since September 2024. Additionally, residential sales fell -12.6% YoY last month, the sharpest decline this year.”
Falling prices coincided with a marked decline in real estate investment, another housing sector headwind. The Kobeissi Letter added:
“Real estate investment dropped 1.2% in the first half of 2025, recording a new low since the 2020 pandemic. China’s property market crisis is deepening again.”
Housing Market, Youth Unemployment, and US Tariffs Call for More Stimulus
The combination of a potentially deepening housing market crisis and high youth unemployment will likely be focal points in H2 2025. China’s youth unemployment rate fell from 15.8% in April to 14.9% in May. Shrinking profit margins from weakening external demand may intensify if more ASEAN nations agree to punitive US tariffs on transshipments.
Vietnam agreed to a 40% tariff on transshipments, potentially impacting Chinese efforts to bypass US levies on exports bound for the US. Chinese exports to ASEAN countries increased from 15% YoY in May to 17% in June.
Economists Predict a Challenging Second Half of 2025
Garcia Herrero suggested the need for further stimulus from Beijing in the second half of the year, stating:
“We’ve been actually expecting, for quite a while, stronger stimulus for the second half. {…} We were expecting much worse export data than we’ve seen for the first half of the year, and that’s true even for June. We’re going to have a good GDP number. But, second half of the year, that’s in a way where things could really get worse, both in terms of exports but also in terms of the whole sentiment. Because the second half of the year is expected to be much worse, I think they need to stimulate further. They have started already, it’s just a question of how much more they will do.”
She attributed the first half of the year trends to front-loading, the pause on Liberation Day tariffs, and China’s rerouting efforts to bypass US tariffs.
Commenting on trade in the second half of the year, Garcia Herrero added:
“Rerouting will be much harder in the second half. So that’s going to hit Chinese exports indirectly. So, that’s why the second half is tougher and the government has been preparing.”
On stimulus, she expects more stimulus, stating:
“I think they’re going to announce more on the monetary and fiscal side. The fiscal stance in China is at least neutral if not positive. It was negative throughout 2024, so we already are in a stimulus phase. But it’s going to be more so that they can hit the target, which is not too far. First half was so good. So, they just need to do more, but not like a big bang. I am not expecting a big bang. It’s just more of that, what has been sustaining the economy so far.”
However, Garcia Herrero said not to expect stimulus on household support, adding that consumption will not be the primary growth driver in 2025.
Hang Seng Index Leads Mainland China Markets on Easing US Tech Export Restrictions
Positive sentiment toward China’s Q2 GDP numbers and June’s exports bolstered demand for Mainland China-listed stocks. Year-to-date (YTD), the CSI 300 and Shanghai Composite Index are up 1.84% and 4.54%, respectively.
Meanwhile, the Hang Seng Index has soared 22.64% YTD as easing restrictions on chips to China fueled investor demand for electric vehicle (EV) and tech stocks. The Hang Seng TECH Index is up 21.82% YTD. Despite concerns about China’s housing market, the Hang Seng Mainland Properties Index has gained 12.14%.
Reports that NVIDIA (NVDA) and Advanced Micro Devices (AMD) plan to resume chip exports to China contributed to the Nasdaq Composite Index’s YTD gains. The Index is up 7.35%, trailing the Roundhill China Dragons ETF’s 19.18% rise.
