China’s Property Prices Fall Fastest Since 2021 as Crisis Grows

• Evergrande’s impending delisting underscores deepening economic instability.
• Government interventions fail to curb consumer pessimism and property slump.

China is grappling with a deepening economic crisis, driven by a prolonged property market slump, declining consumer confidence, and ineffective government interventions. On August 16, 2025, Mitrade reported that the economic downturn is being exacerbated by deflation and stagnating nominal GDP growth, leaving policymakers with limited tools to address the challenges.

The property sector continues to be a major source of economic instability. New-home prices have been declining continuously since August 2021, with the pace of the decline recently accelerating. The situation has further deteriorated with the announcement that China Evergrande Group, once the nation’s largest property developer, is set to be delisted from the Hong Kong Stock Exchange on August 25, 2025. Evergrande’s financial troubles began in 2021 when it defaulted, and its subsequent failure to present a viable debt restructuring plan for over $300 billion in liabilities led to a liquidation order in early 2024.

The ongoing property crisis has significantly diminished consumer confidence. Real estate has historically been a key driver of household wealth in China. The persistent fall in property prices has created a negative wealth effect, prompting households to reduce spending and focus on repaying existing debt. This shift in behavior was underscored by a contraction in bank loans in July, marking the first such occurrence in two decades.

Government efforts to mitigate the economic slowdown have so far proven ineffective. Authorities have implemented measures such as easing borrowing restrictions and cutting interest rates to stabilize the economy and the property sector. However, these efforts have failed to reverse the decline in home prices or restore consumer optimism. A short-lived government program aimed at encouraging retail spending by incentivizing the replacement of old household items briefly stimulated demand but faltered when the allocated funds began to deplete.

Deflation and stagnant nominal GDP growth are further compounding the economic challenges. Tax revenue is being eroded due to deflationary pressures, while the nominal GDP growth rate of 3.9% in the last quarter was the lowest on record since 1993, excluding the pandemic period. By comparison, Japan recorded a higher nominal GDP growth rate of 4.2% during the same period, highlighting the severe pace of economic deceleration within China.

Amid the domestic economic turmoil, China’s export sector showed a surprising uptick in July, with shipments rising 7.2% year-on-year. Growth was driven by demand from the European Union, Southeast Asia, and Australia. However, exports to the United States continued their decline for the fourth consecutive month, as tariffs remained in place. Concerns have been highlighted about whether this export-driven momentum is sustainable, particularly as European leaders begin to voice apprehensions about trade relations.