Eric Li, a mid-level manager at a state-owned enterprise, recently sold his two-bedroom flat in Tianjin for 2 million yuan (US$275,700) – “about 20 per cent more than he paid for it 12 years ago.” Yet, after deducting renovation costs and interest payments, the gain was marginal. Still, he said, “At least I didn’t lose money.”
His situation highlights a growing dilemma: “what to do with the money from the sale.” Li doesn’t see any easy options. He believes housing prices in most Chinese cities “are still in the process of bottoming out.”
Real Estate No Longer a Safe Bet
For years, middle-class Chinese saw property as a guaranteed way to build wealth. But that belief has been upended. “They’re shocked at the lack of prospects,” said Simon Zhao, associate dean of the Faculty of Humanities and Social Sciences at Beijing Normal University-Hong Kong Baptist University United International College.
“Never before did they think that their primary [source of] wealth – properties in first- and second-tier cities – would shrink so drastically,” he said. Zhao added, “All the other investments and spending that used to be based on the constant appreciation of their homes over the years are now unworkable.”
Shrinking Yields, Fewer Options
“Three or four years ago, a 1 million yuan principal in bank-guaranteed financial products could generate at least 40,000 yuan in annual returns,” Li said. “Now, it barely earns just over 10,000 yuan.”
He considered investing in real estate or traditional industries but concluded it is “likely to only lead to losses.” He also explored the idea of opening a stock trading account in Hong Kong to invest in stable, dividend-paying companies. However, “Beijing’s cross-border capital controls make it is difficult for mainland residents to deposit large sums of money in Hong Kong.”
Online communities such as Reddit stock market forums have become places where retail investors exchange ideas, sometimes discussing stocks like CFLT stock, RMBl stock, or OTCMKTS listings as alternatives to traditional investment strategies.
Market Volatility Increases Investor Caution
The volatility of mainland stock markets has made retail investors more cautious. The CSI 300 Index gained 15 per cent last year, but “that was mostly driven by a 25 per cent surge during the last three months of a roller-coaster year.”
“Last year’s fluctuations were too drastic, and I can’t build confidence in the stock market,” Li said. “I only dare to make very small, short-term investments.” Major indices like Dow Jones futures MarketWatch and Dow Jones futures CNN show similar swings globally, making it hard to find solid ground.
Traditional Safe Havens Now Risky
The US dollar and gold have long been considered safe during uncertain times, but they are no longer immune to risk.
Penny Lin, an account director at a Shanghai advertising firm, exchanged over 364,000 yuan for US$50,000 at a rate of 7.29 in December and placed it in a one-year fixed deposit with a 4.5 per cent interest rate.
“At the time, I thought dollars were the safest bet,” she said. “But now, concerns about the dollar depreciating are growing, and I’m starting to worry about what to do when my deposit matures.” Investors watching Coinbase Global stock or diversifying with Enbridge stock NYSE are also navigating uncertain waters.
Engineer Arthur Kou in Guangzhou has been buying gold for the past year, but with prices soaring, he’s unsure about the next step. “Rising prices have made the market less accessible,” and he’s questioning whether to “buy more or sell at what could prove to be a peak.” Services offering cash for gold, Goldco, or American Hartford Gold are seeing increased attention, but many investors remain hesitant.
Signs of Declining Confidence
Gold jewellery prices at major Chinese retailers have surged about 14 per cent this year, hitting “more than 920 yuan a gram in late March.” Even once-coveted luxury watches are losing value.
According to domestic media reports, a popular Rolex model “was as high as 1.2 million yuan at its peak,” but fell to 800,000 yuan in 2022 and is now “around 420,000 yuan” – a drop of nearly 50 per cent in three years.
“The decline in luxury watch prices reflects how pessimistic people are about future wealth accumulation and spending,” said Stephen Liu, a Shenzhen tech executive.
“In the past, my friends and supervisors were keen to invest in and hold luxury watches, believing they offered better returns than yuan, bitcoin or dollars,” he said. “But now, even buying watches at such low prices carries significant risks, and the chances of appreciation are slim.”
Cautious Outlook Moving Forward
According to Liu, professionals in Shenzhen’s tech sector are looking toward Hong Kong-listed stocks in emerging sectors. Still, he noted, “the general consensus is that investments need to be more cautious this year than ever before.” For some, diversification now includes tracking Nasdaq Microsoft, holding TMUS, or reviewing foreign-listed equities through OTCMKTS to better manage risks.
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