Shanghai cuts bureaucracy: from 3 to 1 year of social contribution to buy property
In September 2024, the municipal government of Shanghai announced one of the most aggressive easing measures in the Chinese real estate market in decades: the social security contribution requirement for non-resident buyers fell from 3 years to just 1 year. In areas outside the city's outer ring road, the requirement was completely eliminated.
This measure is part of a larger package that included reductions in the minimum down payment for the first property (from 30% to 20%) and for the second property (from 50% to 35%). Mortgage interest rates were also cut, following the national reduction promoted by the People's Bank of China (PBoC).
Shanghai did not act alone. By the end of 2024, more than 50 Chinese cities had relaxed or completely eliminated their restrictions on property purchases — including Guangzhou, which became the first mega-city to remove all purchase restrictions. Beijing and Shenzhen followed with similar measures, albeit less radical.
Why China is desperate to revive the real estate sector
To understand the urgency of these measures, consider one number: the real estate sector and its related activities (construction, materials, associated financial services) represent between 25% and 30% of China's GDP, according to IMF and Goldman Sachs estimates. Some economists, such as Harvard's Kenneth Rogoff, have placed this figure as high as 29% when including all adjacent activities.
When this sector stalls, the entire economy feels it. And the sector has stalled — badly.
New property sales in China fell 26.5% in 2022 and another 6.5% in 2023, according to data from the National Bureau of Statistics (NBS). Prices of used properties in 70 major cities declined for 18 consecutive months between 2023 and mid-2024. Investment in real estate development fell 10% in 2022, 9.6% in 2023, and continued negative in 2024.
New home construction, measured by area started, plummeted more than 40% between the 2021 peak and the end of 2024. In practical terms, this means less demand for steel, cement, glass, aluminum — and, crucially, iron ore.
Evergrande and Country Garden: the crisis that changed everything
The root of this crisis has a name. Evergrande Group, once the world's most indebted property developer, defaulted on its offshore bonds in December 2021. At the time, the company owed about 2 trillion yuan (approximately $310 billion) to retail investors, banks, suppliers, and international creditors.
In January 2024, a Hong Kong court ordered the liquidation of Evergrande. But the damage was already done: the confidence crisis spread to dozens of other developers.
Country Garden, once considered one of the healthiest developers in the country, went into default in October 2023 after failing to pay $15.4 million in bond coupons. The company had reported a record loss of $7.6 billion in the first half of 2023. For a company that was China's largest developer by sales in 2022, it was a precipitous fall.
Other developers such as Kaisa Group, Fantasia Holdings, Sunac, and Shimao also faced financial difficulties. In total, more than 50 Chinese developers are estimated to have defaulted on some kind of debt obligation between 2021 and 2024.
The underlying problem was structural: the "three red lines" (三道红线), regulation imposed by Beijing in August 2020, capped developer debt based on three financial indicators. Companies that crossed these lines could not increase their debt. The goal was to deflate the bubble, but the timing coincided with the post-Covid slowdown, creating a perfect storm.
The September 2024 stimulus package and its consequences
The Chinese government did not stand still. On September 24, 2024, the PBoC announced the largest stimulus package since the pandemic. The measures included:
- A 50 basis point cut in the reserve requirement ratio (RRR), releasing about 1 trillion yuan ($142 billion) in liquidity;
- A 30 basis point reduction in the benchmark interest rate (MLF);
- A cut in existing mortgage rates, benefiting about 50 million families;
- A reduction in the minimum down payment for second properties from 25% to 15% at the national level;
- The creation of a 300 billion yuan fund for local governments to buy unsold properties and convert them into social housing.
Chinese markets reacted strongly: the CSI 300 rose 25% in just five trading sessions after the announcement. But the euphoria was partial. In the following months, real estate sector indicators showed only modest improvement — sales in November and December 2024 edged up compared to the same period in 2023, but construction investment remained negative.
In 2025, further rounds of easing followed: more cities eliminated purchase restrictions, resale price caps were removed in various regions, and "trade-in" programs for old properties gained scale. Entering 2026, the consensus among Goldman Sachs, UBS, and Nomura analysts is that China's real estate sector should hit bottom between late 2025 and mid-2026, with a gradual stabilization — but far from a return to 2019-2021 volumes.
Iron ore: the link connecting Shanghai to Brazil's Port of Tubarão
For Brazil, all of this is more than a distant story. China is the destination for approximately 65% of all Brazilian iron ore exports, according to data from the Ministry of Development, Industry, Trade and Services (MDIC). In 2023, Brazil exported $28.7 billion in iron ore, and China bought the bulk of it.
China's real estate sector consumes about 35% of all steel produced in the country, according to the World Steel Association. China, in turn, produces more than 50% of the world's steel — and to do so, imports more than 1.1 billion tons of iron ore per year, of which about 21% comes from Brazil (the remainder mostly from Australia).
When the real estate crisis hit Chinese construction, iron ore prices felt it. After reaching $220 per ton in May 2021 (at the peak of the post-Covid recovery), the price fell below $100 on multiple occasions throughout 2023 and 2024. At the start of 2026, ore trades in the $95 to $110 per ton range, well below historical highs.
For Vale — the world's largest iron ore producer — each dollar move in ore prices represents hundreds of millions in annual revenue. CSN Mineração and Samarco (joint venture between Vale and BHP) are also directly affected. On the Australian side, BHP and Rio Tinto face the same scenario.
What a recovery (even partial) would mean for Brazil
If the easing measures take hold and China's real estate market stabilizes in 2026, the implications for Brazil are concrete:
1. Iron ore price: A stabilization of Chinese construction, even without returning to peak volumes, would support ore prices above $100 per ton. Each $10 increase in the average annual price represents approximately $3 to $4 billion in additional Brazilian trade balance revenue, given the volume exported.
2. Vale revenues and federal tax receipts: Vale alone accounted for about 5% of all CFEM (mining royalties) collection in Brazil in 2023. A price recovery improves dividends, investments, and tax collection in states like Minas Gerais and Pará.
3. Exchange rate and current account: Iron ore is Brazil's second largest export item (after soybeans only). A sustained increase in metallic commodity export revenues pushes the real higher, with ripple effects on inflation, interest rates, and monetary policy.
4. Other commodities: Chinese construction consumes large volumes of copper, aluminum, and pulp for finishing. A sector recovery would also benefit Brazilian exporters of these products, such as Suzano (pulp) and Paranapanema (copper).
The risks that remain
It is tempting to read Shanghai's easing and the 50+ city measures as a definitive turning point. But real risks remain:
Excess inventory: China still holds an estimated 300 to 400 million square meters of unsold residential properties in second and third-tier cities, according to the China Real Estate Information Corporation (CRIC). This is not resolved by cutting bureaucracy.
Consumer confidence: Even with lower rates and fewer restrictions, the average Chinese consumer remains cautious. The household savings rate rose above 33% in 2024, according to the PBoC — a signal that people are saving, not spending.
Unfavorable demographics: China's population is shrinking. In 2023, the population fell for the second consecutive year, and the birth rate hit a record low of 6.39 births per thousand inhabitants. Fewer people means, in the long run, less housing demand.
Local government debt: Many municipal governments depended on land sales for 30% to 40% of their revenues. With the decline in land sales (down about 20% in 2023), the fiscal position of many municipalities is precarious. This constrains their capacity for local stimulus.
Geopolitical context: why timing matters
The easing of China's real estate market in 2024-2026 does not occur in a vacuum. It coincides with the renewed trade war between China and the United States under the Trump 2.0 administration, with tariffs of up to 60% on Chinese goods under discussion. China needs domestic demand to offset external pressure — and the real estate sector is the most obvious lever.
For Brazil, which maintains robust commercial ties with both sides, the scenario presents both opportunity and risk. If China can stabilize its real estate sector without a systemic financial crisis, demand for Brazilian commodities holds. If it fails, the impact on Brazil's trade balance — which recorded a record surplus of $98.8 billion in 2023 — will be significant.
What to watch in the coming months
For those tracking the Chinese economy with an eye on Brazil, the key indicators are:
- New property sales (NBS, monthly): The most direct measure of demand;
- Real estate development investment (NBS, monthly): Indicates whether developers are building again;
- Iron ore price (SGX, DCE): Immediate reflection of expectations for Chinese construction;
- House price index in 70 cities (NBS, monthly): Shows whether prices have stopped falling;
- Land sales by local governments: Sign of municipal fiscal health and developer appetite.
Shanghai easing its property purchase rules is simultaneously symbolic and practical. Symbolic because Shanghai is China's financial capital — when it moves, markets pay attention. Practical because it can bring buyers back to the market.
But between easing rules and reviving a sector representing nearly a third of the economy, there is a vast gap. And it is in that gap that uncertainty lives — for the Chinese and for the Brazilians who depend on China's appetite for iron ore.
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