The Chinese Titanic Just Hit a Second Iceberg

Key Takeaways

• Primary property transactions stable post‑Lunar New Year
• Secondary market volumes remain depressed across major cities
• EV sales fell in February, below 2025 levels
• Incentive cuts drive slowdown in Chinese EV market
• Potential rebound if export demand rises

Pulse Analysis

China’s housing sector is showing a bifurcated picture. Primary‑market activity, measured by a 30‑city average, rebounded after the Lunar New Year, suggesting that home‑buyer sentiment among first‑time purchasers remains intact. However, the secondary market—captured by a 16‑city average—continues to struggle, with transaction volumes well below pre‑holiday norms. This divergence points to lingering financing constraints and over‑supply in older stock, factors that could pressure banks and developers if the trend persists.

The electric‑vehicle segment adds another layer of complexity. February data reveal a decline in EV sales, slipping beneath the 2025 baseline after the government phased out generous purchase subsidies. The policy shift has exposed the sector’s reliance on fiscal support, prompting manufacturers to reassess pricing and production strategies. Yet, the longer‑term outlook may benefit from geopolitical dynamics; heightened U.S. trade friction could accelerate global demand for Chinese‑made EVs, positioning domestic firms as export champions.

Investors should monitor three interlinked risks: credit exposure in the secondary property market, the pace of EV market adjustment to incentive removal, and the potential upside from export‑driven EV growth. A sustained property slowdown could trigger broader economic deceleration, while a successful EV export push might offset some of that drag. Understanding how policy, market sentiment, and international competition intersect will be key to navigating China’s evolving growth narrative.