China Housing Stimulus Bets Lift CSI 300 and Shanghai Composite

China Housing Market – Is Stimulus on the Horizon?

China’s housing market has been a focal point throughout 2025 as Beijing attempts to counter US tariffs with policies aimed at boosting domestic consumption.

Real estate development declined 12.9% year-on-year from January to August. Residential housing sales areas fell 4.7% YoY from January to August, following a 4% drop from January to July. The decline in total residential housing sales steepened, falling 7.3%. Sentiment toward the real estate sector dropped from 93.33 to 93.05, marking a fifth consecutive monthly decline.

August’s numbers fueled speculation about potential stimulus as China’s broader economy lost momentum.

Calls for Policy Support

This week, Huang Yiping, a monetary policy committee member at the People’s Bank of China reportedly called for fiscal support measures for the housing market. He stated:

“Given the systemic impact of the real estate sector on macroeconomic fluctuations, stabilizing this industry is crucial for sustaining upward momentum in the broader economy.”

Stimulus measures to revive the housing market could be the much-needed tonic for Chinese consumers and the transition toward a consumption-led economy.

Consumer Confidence on the Brink

China’s housing market slump has crashed household confidence. Consumer confidence dropped to 87.9 in June (latest available data), nearing the November 2022 all-time low of 85.5. The housing market played a significant role in the slump in sentiment in 2022 and continues to weigh on confidence in 2025. Housing market conditions have not improved, impacting consumer spending and undermining Beijing’s efforts to revive domestic demand.

Retail sales grew 3.4% year-on-year in August, easing from 3.7% in July and down sharply from 6.4% in March. For context, Chinese retail sales have averaged 12.09%.

The Consumption Challenge

While private consumption only accounts for about 40% of China’s GDP, weakening external demand has put the spotlight on domestic consumption. China continues to rely on investment and exports. However, Beijing has pushed to transition toward a consumption-driven economy to ease reliance on external demand.

US tariffs have weighed on demand for Chinese goods. Exports rose 4.4% year-on-year in August, tumbling from a 7.2% surge in July. The slump in exports and pullback in consumer spending challenge Beijing’s 5% GDP growth target, pressuring policymakers to roll out fresh stimulus.

Targeting the housing market could potentially address the root cause of China’s domestic demand and deflation paradox. A rebound in domestic consumption could ease pressure on margins and boost employment, another piece of the consumer confidence puzzle. Unemployment increased to 5.3% in August, up from 5.2% in July, while youth unemployment soared to 18.9%.

Mainland Markets Surge

The potential for more stimulus, targeting China’s housing market, has lifted investor sentiment. Mainland China’s CSI 300 climbed to a high of 4,590 on Thursday, September 25, its highest level since March 2022. The Shanghai Composite Index reached a 10-year high of 3,900 in early trading on Thursday, September 25.

Year-to-date, the CSI 300 and the Shanghai Composite Index have rallied 16.7% and 15.0%, respectively, despite US tariffs, housing market woes, and waning demand.

China’s race to dominate the AI space, its advancements in semiconductors, and expectations of further stimulus support have boosted demand for Mainland-listed stocks. Delivering policy support to the housing market and improving consumer confidence could potentially lift the Mainland Indexes toward all-time highs.

For perspective, the Hang Seng Index has surged 32.3% YTD, increasing the appeal of Mainland A-shares relative to Hong Kong-listed equities.

The Road Ahead: Stimulus and US-China Trade Talks

Near-term focus will be on Beijing and any policy measures targeting the housing sector and domestic consumption. Furthermore, US-China trade talks will also be crucial. The upcoming APEC Summit in South Korea, October 31 to November 1.  The Summit could set the stage for a President Trump and President Xi showdown.

A trade deal, including zero tariffs and addressing domestic demand, could be pivotal for the Chinese economy and Mainland-listed stocks. The CSI 300 climbed to an all-time high of 5,931 in February 2021, while the Shanghai Composite Index reached its record high of 6,124 back in October 2007.

Meanwhile, next week’s private sector PMI data for September will indicate how pressing it would be to address the economic headwinds.

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