At the 2026 NetEase Economists’ Conference in Beijing, veteran macroeconomist Li Xunlei sketched a cautious picture of China’s near-term economic outlook. He argued that the country faces an unusual confluence of trends — a downshifting population cycle, slowing urbanisation and a real-estate downturn — that together mean the property market has yet to finish its adjustment and that buying in 2026 may be less attractive than renting.
Li anchored his housing diagnosis in a simple valuation metric: the national rent-to-price ratio remains very low, at roughly 2 percent, which he said corresponds to an eye‑watering 50x price-to-rent multiple — well above what he considers a reasonable long‑run level. That gap implies material downside for prices in many parts of the country if fundamentals do not reverse. He warned the adjustment is still in its early stages: China’s market has been coming off its peak since 2021, only about four years so far, whereas international episodes of property busts have sometimes lasted decades.
But Li was careful to stress that China’s housing market is not monolithic. Lower-tier cities already show rent-to-price ratios above 3 percent, while first-tier cities such as Beijing and Shanghai remain below 2 percent. In the latter, persistent net population inflows and tight supply dynamics provide partial support to values, creating a geographically uneven outlook analogous to the low rental yields seen in other global megacities.
A structurally worrying feature, Li added, is that rents and prices are falling in tandem — and rents are currently declining faster. Since the rent‑to‑price ratio equals rents divided by prices, the market needs rents to stabilise or rise while prices fall if a clear bottom is to form. The current synchronised contraction, he said, prolongs the time it will take for a sustained recovery signal to appear, and makes 2026 a year where renting could be the safer financial choice for many households.
On financial markets, Li urged regulators to tame the scale of quantitative trading, which now accounts for roughly 30 percent of turnover in China’s equities market. He recommended a modest cap — around 20 percent — and stronger rules to ensure openness, fairness and to curb manipulative practices, while acknowledging that electronic strategies improve liquidity. He judged that the bull-market case is not yet firmly established: corporate profits improved in early 2025 but whether earnings can keep rising depends on successful AI adoption and deeper reforms.
Li expressed long‑term optimism on gold even if 2026’s gains may not match 2025’s dramatic rally. He noted that decades of monetary expansion have outpaced central banks’ additions to official gold stocks and argued that any weakening of the dollar’s dominance would encourage further reserve buying. He recommended gold as a portfolio hedge — but limited to under 20 percent of personal assets — and advocated diversifying into high‑dividend equities and selected overseas growth markets such as India and the US.
On artificial intelligence, Li struck a measured tone: the industry is still in its infancy and likely to take decades to mature into broad economic transformation. That long horizon will produce a brutal “winner takes most” dynamic, making the selection of potential industry leaders the sensible investor strategy. He warned against complacency — the moment everyone agrees there is no bubble is when the greatest risks tend to materialise.
Beyond markets, Li laid out explicit social policy prescriptions to buttress consumption and guard against social backsliding. He urged raising the basic rural pension to 500 RMB per month, issuing food vouchers to low‑income households to stabilise basic demand, and tailoring trade‑in subsidies toward young and lower‑income buyers for small‑ticket items rather than car subsidies that chiefly benefit higher earners. To close pension shortfalls he advocated issuing ultra‑long special sovereign bonds to provide one‑off financing rather than throttling support through austerity.
Li’s remarks are a reminder that China’s policy calculus in 2026 must balance fragile household sentiment, financial stability and longer‑term structural reform. If property prices continue to fall, the consequences will stretch from household wealth to banks’ balance sheets and local government revenues. Investors and policymakers should therefore watch rent trends, corporate earnings momentum, AI commercialisation, and whether Beijing adopts the targeted social and fiscal measures Li recommends as signals of how quickly the adjustment will end and a durable recovery can begin.