Author | Zhou Zhiyu
Editor | Zhang Xiaoling
&#34;China's economy shows unexpected resilience,&#34; said Zhu Haibin, Chief Economist for China and Head of Economic Research for Greater China at JPMorgan, during the &#34;JPMorgan Global China Summit Media Briefing&#34; on May 21.
Zhu Haibin believes that there are signs of stabilization in first- and second-tier cities, but third- and fourth-tier cities are experiencing prolonged adjustment cycles due to high inventory and insufficient demand. New home sales and construction indicators are expected to decline year-on-year in 2025, but these indicators are anticipated to bottom out and stabilize in 2026.
On the policy front, &#34;stabilizing real estate&#34; needs to balance short-term relief with long-term model transformation. New key projects such as affordable housing and urban village renovation will be crucial in offsetting the downturn in commercial housing.
Zhu Haibin believes that the risks in China's real estate sector are fundamentally different from Japan's &#34;balance sheet recession.&#34;
This is reflected in the fact that Japan's balance sheet recession at that time was mainly in the corporate sector, where companies had excessive exposure to real estate. After the decline in real estate, it affected companies' balance sheets and their willingness to invest. This was the core story in Japan at that time.
In China, there is an impact on the household sector, but it is milder than in Japan back then. In the corporate sector, companies' direct risk exposure to real estate is not as pronounced as it was in Japan.
Going forward, consumption and investment are expected to improve due to policy efforts. In terms of consumption, the scale of trade-ins has doubled from 150 billion to 300 billion, with policy stimulus shifting from &#34;statements&#34; to &#34;actions&#34;; in terms of investment, the central government's expansion of fiscal policy has become a key feature of the &#34;second half&#34; of policy, contrasting sharply with last year's focus on hidden debt replacement and bank recapitalization in the &#34;first half.&#34;
Zhu Haibin particularly emphasized that monetary policy faces the balancing challenge of &#34;stabilizing the exchange rate&#34; and &#34;broadening credit.&#34; Although the reserve requirement ratio has been lowered to 6.4% and the space for interest rate cuts is narrowing, the central bank still has room for 1-2 rate cuts this year, with the timing depending on exchange rate stability and bank interest margin pressures.
In May, the RMB exchange rate stabilized due to easing tariff risks, and it is expected to fluctuate between 7.2 and 7.3 against the US dollar in the next 6-12 months, with exporters' willingness to convert currency becoming a key variable.
Of course, while the policy level prioritizes &#34;expanding consumption,&#34; short-term growth still relies on investment. Consumption stimulation needs to address two major bottlenecks: first, the slowdown in residents' income growth and weak employment expectations, which constrain consumption capacity; second, the diminishing wealth effect from real estate, with April retail data still below expectations. Zhu Haibin suggests that the next step in policy should focus on the &#34;income-consumption&#34; cycle, boosting residents' confidence through tax cuts and social security reforms

- Morgan Stanley's chief economist for China, Zhu Haibin, highlighted the unexpected resilience of the Chinese economy during a media briefing on May 21.  
- He noted signs of stabilization in first- and second-tier cities, while third- and fourth-tier cities face prolonged adjustments due to high inventory and insufficient demand, with new home sales expected to decline in 2025 but stabilize in 2026.  
- Zhu emphasized the need for balanced policies to support real estate, suggesting that consumption and investment could improve through government action, despite challenges in consumer income growth and the diminishing wealth effect from real estate.

JPMorgan Chase's Zhu Haibin: The real estate market will stabilize in 2026