China’s latest stimulus measures, aimed at stabilizing its faltering property market, may provide short-term relief, but long-term economic growth prospects are less promising, according to Mark Delaney, Chief Investment Officer (CIO) of AustralianSuper, Australia’s largest pension fund. Delaney, speaking at a Bloomberg event in Sydney, expressed concerns that China’s era of rapid growth is over, and investors should prepare for more modest expansion in the future.
Delaney, whose fund manages over A$341 billion (US$229 billion), was candid about his outlook on China’s economic trajectory. “The big boom times in China growth are gone,” he remarked, reflecting on the country’s earlier decades of soaring economic progress, when annual GDP growth hovered around 9%. Today, however, he anticipates that the country’s growth will slow significantly, with future rates likely to be between 4% and 5% — still respectable by global standards, but far removed from the hyper-growth that characterized China’s rise as a global economic powerhouse.
This perspective aligns with broader concerns that China’s rapid expansion, fueled by massive infrastructure investment and a booming property market, has reached a tipping point. The country’s urbanization and real estate sectors, once critical drivers of growth, now face significant challenges. And despite new stimulus measures, Delaney believes that the structural factors contributing to China’s current economic slowdown will be difficult to reverse.
China’s recent stimulus efforts have largely focused on revitalizing its beleaguered property market, which has been a cornerstone of the economy for years. The government unveiled a comprehensive support package, including a $5.3 trillion reduction in mortgage borrowing costs and a relaxation of down-payment requirements for second-home buyers. These moves are designed to inject liquidity into the housing market and prevent further declines in property prices.
“The authorities have been really keen to try and keep house prices steady,” Delaney observed, emphasizing that stabilizing the property market is crucial to avoiding a broader economic downturn. He explained that a sustained property slump could erode consumer confidence and spending, triggering a negative feedback loop that could weigh on the broader economy — a scenario that has played out in other countries following housing crashes.
In particular, China is keen to avoid the kind of long-term stagnation that has plagued other economies in the aftermath of property bubbles. Delaney cited AustraliaSuper’s analysis of Japan’s economic crisis in the 1990s as a cautionary tale. Japan’s property bubble burst led to years of deflation and sluggish growth, with the housing market taking decades to recover fully.
“Governments all try and stabilize it, but you need to really work off the structural oversupply,” Delaney said. “So I think that’s really going to be a pretty pronounced impact upon China.” The oversupply of real estate in China, especially in smaller cities, has become a significant concern, with entire “ghost cities” of unsold properties contributing to the problem.
China’s property market, which accounts for about a quarter of the country’s economic activity, has been under severe pressure for several years. Developers like Evergrande, once giants of the sector, have defaulted on their debts, and a wave of bankruptcies has rippled through the industry. These failures have exposed deep structural issues in the property market, including oversupply, high levels of corporate debt, and diminishing demand for new homes as China’s population growth slows.
To mitigate these risks, Chinese authorities have been gradually rolling out stimulus measures, but the scale of the problem is daunting. The government’s latest round of interventions is aimed at bolstering consumer confidence and preventing the housing market’s collapse from spilling over into the broader economy. However, analysts remain skeptical about the effectiveness of these policies in addressing the underlying issues.
One key challenge is China’s shrinking demand for new housing. As the population ages and urbanization slows, there are fewer new homebuyers to absorb the oversupply of properties. In addition, many potential buyers are wary of entering the market amid ongoing concerns about developers’ financial stability and the potential for further price declines.
Despite these challenges, the government remains committed to supporting the property sector, which it sees as critical to maintaining social stability. At a briefing on Saturday, Finance Minister Lan Fo’an vowed to introduce new measures to support the real estate market and hinted at increased government borrowing to finance additional stimulus.
The question on many investors’ minds is whether China’s latest stimulus measures will be enough to stabilize the economy and prevent a protracted downturn. Markets are closely watching for signs of further government intervention, with many expecting additional fiscal support in the coming months.
At the same time, the broader investment community is recalibrating its expectations for China’s growth. The days of double-digit expansion are clearly over, and many analysts believe that the country will struggle to maintain even moderate growth rates in the face of demographic challenges, rising debt levels, and the ongoing U.S.-China trade tensions.
For investors, the shift in China’s economic outlook has profound implications. Delaney’s comments at the Bloomberg event reflect a growing consensus that the best days of China’s economic boom are behind it. While the country will remain an important player in the global economy, its role as a driver of global growth is likely to diminish in the coming years.
Delaney’s advice for investors is to adjust their expectations and position themselves for a slower, more mature phase of China’s economic development. “China is transitioning to a different stage of growth,” he said. “It’s still going to be a very large and important economy, but the nature of its growth is changing.”
The implications of China’s economic slowdown extend far beyond its borders. For decades, China’s rapid growth has been a key engine of global expansion, driving demand for commodities, technology, and consumer goods. Countries like Australia, which has deep economic ties to China through trade and investment, are particularly vulnerable to a slowdown in Chinese growth.
Australia’s resource sector, in particular, has benefited enormously from China’s construction boom, with exports of iron ore, coal, and liquefied natural gas (LNG) helping to fuel the country’s economic growth. However, as China’s demand for raw materials wanes, Australia and other commodity-exporting nations may face headwinds.
In addition, China’s transition to a slower-growth economy could lead to changes in global supply chains. As labor costs in China rise and demand for cheap manufactured goods declines, companies may look to diversify their production bases, potentially shifting operations to other emerging markets with lower costs.
As China navigates this challenging period, the government will need to strike a delicate balance between stimulating short-term growth and addressing the structural issues that are weighing on the economy. In addition to the property market, the country faces a range of other challenges, including an aging population, rising income inequality, and increasing geopolitical tensions with the United States.
The property sector remains the most immediate concern, and many analysts expect the government to continue rolling out measures to support the market. However, there is a growing recognition that these efforts may only provide temporary relief and that the deeper problems facing China’s economy will require more fundamental reforms.
For now, investors will be watching closely to see how China’s stimulus efforts unfold and whether they are sufficient to prevent a more significant economic downturn. While the country may be able to stabilize its property market in the short term, the long-term outlook remains uncertain, and the era of rapid, sustained growth appears to be coming to an end.
