Chinese authorities are implementing a multi-faceted national strategy to address the country’s substantial housing inventory surplus, combining targeted municipal policies with broader market interventions. The initiative comes as data reveals a critical imbalance, with the average inventory clearance period across 100 major cities reaching 27.4 months in November—nearly double the 14-month threshold considered healthy for a balanced market.
The approach features distinct regional variations, with first-tier cities averaging 17.1 months of inventory, second-tier cities at 22.6 months, and third- and fourth-tier markets facing a daunting 40.3-month backlog. Housing Minister Ni Hong emphasized the implementation of city-specific measures to manage new supply while reducing existing stock, particularly through the conversion of commercial properties into affordable housing.
A cornerstone of the strategy involves the innovative use of a 300-billion-yuan ($42.96 billion) relending facility established by the People’s Bank of China to support affordable housing conversions. This financial mechanism, potentially expanded through local government bond allocations, enables the purchase of existing commercial properties for transformation into subsidized housing.
Concurrently, local governments are deploying creative mechanisms including housing “trade-in” programs and voucher systems for urban redevelopment projects. These initiatives facilitate residents’ transition from older properties to new developments while simultaneously reducing inventory overhang.
Market analysts highlight the potential for further policy relaxation in core metropolitan areas. Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, suggested that additional easing of purchase restrictions in Beijing, Shanghai, and Shenzhen could generate significant positive ripple effects across smaller markets.
The long-term vision extends beyond inventory reduction to quality transformation. Minister Ni advocated for constructing “quality homes” with superior design, materials, and maintenance standards, while simultaneously upgrading existing housing stock. Market trends already indicate shifting preferences, with units exceeding 120 square meters comprising 30% of new supply in key cities.
Experts emphasize that stabilizing the property market is crucial for mitigating negative wealth effects on household consumption. Morgan Stanley’s chief China economist Robin Xing noted that restoring confidence in this key asset class would be instrumental in unlocking broader economic spending power.