MNI BRIEF: China Needs Fiscal Expansion For Property Slowdown

China needs to maintain expansionary fiscal and monetary policies to offset the long-term drag from the real-estate slowdown, former Finance Minister Lou Jiwei said Friday at the Caixin Summit 2025.

The property market downturn is expected to persist, despite China’s real-estate bubble beginning to burst in 2021, which has dampened consumption and reinforced deflationary trends. Lou urged the government to allocate funds to acquire unsold homes and convert them into affordable housing, while accelerating reforms to the current presale housing system, which he called “a major flaw.” (See MNI INTERVIEW: China’s Growth To Slow Without Model Changes–Wu)

Key structural reforms, he said, involve the household registration (hukou) and land systems, and improving social welfare for migrant workers, which would help boost consumption and stabilise the property market. Lou also suggested fiscal and tax reforms to increase the central government’s responsibilities and expenditure share.

He added that China should introduce a property tax promptly, noting it is the most suitable type of tax for local governments given their limited revenue sources. While the legislative process for the tax was completed in 2022, its implementation has been delayed due to the real-estate downturn.