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5 years after Evergrande, why a China think tank says stock market signals a turnaround
Domestic A-shares have returned to near-2021 levels as real interest rates decline, though researchers warn a sustained recovery is not yet guaranteed
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Zhu Wenqianin Beijing
The Evergrande debt crisis exposed vulnerabilities in China’s property sector, but a prominent Beijing-based macroeconomic think tank suggests the country may have already moved past the worst of the slump, with the nation’s stock market now supported by a “more favourable macro environment”.
According to a report by the China Finance 40 Forum (CF40), inflation had bottomed out last year and had risen steadily since. Real interest rates – which represent the true cost of borrowing once adjusted for inflation – had fallen markedly, easing downward pressure on stock valuations. The report’s author also noted that credit growth, despite moderating, had never entered a deep contraction.
While a deep correction in the property market tends to have far-reaching effects on the stock market, historical data shows that recoveries vary significantly in speed and scale. To establish this, the researchers analysed stock performance and macroeconomic drivers across 18 deep property slumps globally.
“These differences show little correlation to home price falls, and they mainly depend on post-slump macro conditions,” wrote Yu Fei, a researcher at CF40, in the report.
China’s domestic A-share market – which tracks companies listed on the Shanghai and Shenzhen stock exchanges – plunged 45.6 per cent from its February 2021 peak through September 2024. But the market has broadly maintained an upwards trend since, buoyed by a series of supportive government policies – a timeline that closely aligns with the period when inflation bottomed out and began to recover.
According to the report, published on Sunday, the A-share market had recovered to roughly its 2021 levels.
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