The 2026 NetEase Economist Annual Conference, jointly organized by the China Enterprise Reform and Development Research Association, NetEase Finance, and NetEase Finance Think Tank, was held in Beijing in December 2025, with the theme of this year's forum being "Diversity and Coexistence."
In an exclusive interview with NetEase Finance Think Tank, Li Xunlei, Chief Economist of Zhongtai International and Vice Chairman of the China Chief Economists Forum, stated that the Chinese economy in 2026 is at a critical transition period with multiple overlapping cycles. He noted that the real estate market adjustment is not yet complete, the foundation for an A-share bull market needs to be solidified, the AI industry presents both opportunities and bubbles, while boosting consumption and improving pension security require extraordinary policy efforts. He shared insightful views on core issues including real estate market trends, capital market reforms, industrial investment opportunities, and upgrades to livelihood safeguards.
When asked whether current housing prices have bottomed out, Li Xunlei candidly admitted that this question is as difficult to answer precisely as judging the bottom of a stock. He pointed out that real estate adjustments are not achieved overnight; Japan's property market continued to decline for over 20 years after its bubble burst, while China's real estate downturn, which started in 2021, has only lasted about four years, indicating an insufficient adjustment. From a valuation perspective, the current national price-to-rent ratio is about 2%, equivalent to a 50x P/E ratio, whereas a reasonable level should be around 30x; a low price-to-rent ratio suggests that housing prices still face downward pressure.
However, he also noted significant structural differences in the current real estate market. The price-to-rent ratio in third, fourth, and fifth-tier cities has exceeded 3%, while it remains below 2% in first-tier cities. Yet, the continuous net population inflow into first-tier cities provides some support for prices, a situation similar to the low price-to-rent ratios seen in international metropolises like New York, meaning it cannot be generalized.
Li Xunlei particularly emphasized that China's real estate market is currently facing a triple squeeze of a declining demographic cycle, slowing urbanization, and a downward property cycle—a combination not seen during the property bubble bursts in Europe, the US, or Japan, which warrants serious attention.
Amid the ongoing decline in housing prices, renting might be a more prudent choice. Li Xunlei believes that renting is preferable to buying in 2026, clarifying that renting does not necessarily mean a long-term lease; if prices fall to a reasonable range later, one can still switch to buying.
Regarding the pace of change for rents versus prices, Li Xunlei offered a clear judgment: rents are currently falling faster. He observed that rents in first-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen continue to decline, and the core issue facing the property market is the simultaneous drop in both rents and prices. In the price-to-rent ratio formula, rent is the numerator and price is the denominator. For the ratio to return to a reasonable level, the ideal scenario is for prices to fall while rents rise, which would accelerate the market's bottoming out. However, the current synchronized contraction of both numerator and denominator adds greater pressure to the real estate market's adjustment and suggests that a clear bottom will require more definitive signals.
On the controversy surrounding quantitative trading being accused of "harvesting retail investors," Li Xunlei suggested a dialectical view. He acknowledged that quantitative trading plays a positive role in improving stock market liquidity, but noted that its trading volume now accounts for about 30% of the total market volume, which is relatively high; he recommended moderately restricting it to around 20%. He believes the core returns in the stock market should come from the growth and profits of listed companies, not short-term trading arbitrage. Regulating quantitative trading should adhere to the principles of "fairness, openness, and impartiality," restricting trading behaviors suspected of market manipulation while allowing compliant high-frequency arbitrage.
When asked if the current bull market foundation is solid, Li Xunlei said it still requires further observation. The approximate 5% profit growth of listed companies in the first three quarters of 2025, breaking a three-year streak of negative growth since 2021 and aligning with GDP growth, is a positive signal. However, whether corporate profits can continue to improve in 2026, and whether the application of AI technology and various reform measures can be effectively implemented, remain uncertainties. If these conditions are met, the bull market foundation will be more solid; otherwise, the market may maintain a volatile and divergent pattern.
For ordinary investors, Li Xunlei stated that the biggest "pitfall" to avoid in 2026 is blind optimism about the market. While the term "slow bull" is widely circulated, he believes such consensus should still be questioned, and investors should pay attention to controversial viewpoints.
He emphasized that markets follow the theory of contrarianism; what the majority unanimously agrees on is likely biased, whereas the judgments of the minority are more worthy of attention. Therefore, investors should neither be overly pessimistic nor blindly optimistic; the key is to break away from herd mentality and actively seek structural opportunities. Retail investors are most prone to herd behavior, chasing rallies and selling in panic, but as an economy develops, divergence is an inevitable trend that must be recognized.
Regarding gold price trends, Li Xunlei expressed that although gold's gains in 2026 may be hard-pressed to surpass those of 2025—a year when gold rose over 50% and silver doubled, delivering outstanding performance—the likelihood of another sharp decline in gold prices is low, and he maintains a long-term bullish outlook. He explained that the primary logic for his long-term optimism is that the total gold reserves held by global central banks have not increased significantly compared to 60 years ago, while the global money supply has expanded over 20-fold during the same period. As the US dollar weakens and its international dominance faces uncertainty, any erosion in dollar credibility is expected to prompt central banks to continue increasing gold holdings, thereby providing long-term support for prices.
In terms of allocation advice, Li Xunlei positions gold as an important "risk hedging tool." Amid rising global risks and intensifying international conflicts and rivalries, allocating to gold is a reasonable safe-haven choice, but he suggests it should not exceed 20% of an individual's asset portfolio. Additionally, one could focus on high-dividend equity assets to hedge against the long-term downtrend in domestic interest rates, while also considering cross-market allocations, such as opportunities in overseas markets like India, Africa, and US high-tech. Overall, diversifying across precious metals, equities, and fixed-income assets to reduce concentration is a key strategy for navigating market volatility and preserving wealth.
Despite ongoing discussions about an "AI bubble," Li Xunlei believes the prevalent concern actually indicates that the market remains rational and cautious. In his view, what truly warrants vigilance is not the current heated debate, but a future scenario where everyone unanimously believes "there is no bubble and the prospects are limitless." Therefore, the widespread worry about an AI bubble at this stage actually reduces short-term risks.
Li Xunlei pointed out that the AI industry is still in its early developmental phase, similar to the first and second industrial revolutions, and achieving mass application and market maturity will likely take thirty to fifty years. During the industry's development, a "20/80 phenomenon" or even a "10/90 phenomenon" is inevitable, with many companies being eliminated, especially as the application layer gradually rises, accelerating the shakeout.
For investors, the core strategy for investing in AI is to focus on leading companies. Li Xunlei shared past experience: in 2002, he advocated for analysts to select industry leaders; a portfolio of 30 stocks chosen by 30 analysts significantly outperformed the market over 15 years, even with only a 40% accuracy rate in picking leaders, highlighting the significant premium advantage of top firms. Thus, investors can build a portfolio of potential leading companies without overemphasizing current stock prices, aiming for higher long-term returns.
On the topics of livelihood safeguards and consumption promotion, Li Xunlei proposed several specific suggestions, stressing the need to "spend money on people's livelihoods." He put forward three key recommendations:
First, establish a nationally unified basic pension floor for farmers, raising the standard to 500 yuan per month. The current basic pension for rural elderly is relatively low, and the total expenditure for this standard is manageable; it would both narrow the urban-rural pension gap and provide firmer livelihood security for rural seniors.
Second, trade-in policies should be precisely targeted at low- and middle-income groups and young people. He argued that the main drivers of consumption are the low- and middle-income classes, so subsidies should focus on areas where their demand is concentrated, rather than on high-priced goods like cars—where consumption is dominated by middle- and high-income groups, trade-in frequency is low, and policy effectiveness is limited. Li Xunlei's research found that subsidies for small-ticket items like electric bicycles have the highest multiplier effect, significantly boosting sales volume and leveraging subsidy impact more effectively.
Third, he suggested distributing food stamps to low-income groups. This policy is already widely implemented in many countries, including the United States. Given the current economic volatility and significant impacts on traditional industries, providing food stamps can offer basic living support for the unemployed and low-income groups while effectively guarding against a relapse into poverty after having escaped it. He emphasized that民生投入 (investment in people's livelihoods) is closely linked to stimulating consumption; directing more funds into民生领域 (livelihood sectors) is crucial for activating consumption potential more forcefully.
Discussing practical paths for increasing household income, Li Xunlei believes that expanding transfer income through fiscal subsidies is the most feasible approach. He mentioned that the scale of central government transfer payments to local governments has exceeded 10 trillion yuan in recent years, and a portion of these funds could be allocated to subsidize the public.
Li Xunlei proposed that the pension gap could be filled by issuing ultra-long-term special government bonds, injecting funds into the social security system. Currently, public finance continuously subsidizes social security, with fiscal spending on社保补贴 (social security subsidies) accounting for about 8% of total fiscal expenditure. However, the situation is urgent, and this proportion is expected to rise to 12% by 2030, at which point the scale of pension subsidies will exceed 3 trillion yuan, with further increases likely thereafter.
He emphasized that there is no need to shy away from issuing more debt. Structural problems like the pension gap, if not addressed promptly, will continue to widen, placing a heavy burden on the future economy. Rather than letting problems accumulate due to excessive frugality, it is better to "endure short-term pain to avoid long-term agony" by undertaking large-scale borrowing to resolve current challenges decisively, paving the way for subsequent economic restructuring.
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