🍁 League Discussion — Housing Sectors, China, and Global Trade 🍁

Gentlemen, 

This League Discussion has several questions split into sections: 

A: China: Property, Exports, and Fiscal Strategy 

B: Canada: Housing, Debt, and Policy Options 

C: Global Trade Dynamics 

Which League Member can speak to these voluntarily?

Question 1A: Property Slowdown and Policy: China’s property sector once accounted for perhaps 30-35% of GDP, but investment is now depressed and new construction starts are roughly 75% below their 2021 peaks. With deflation threatening or occurring, elevated real interest rates, and weaker domestic demand, was this slowdown inevitable as internal migration and urban absorption thresholds were reached? And is Beijing now broadly accepting of the sector’s reduced role, given its prior contribution to economic growth and capital formation?

Question 2A: Export Pivot as Structural Adjustment; With domestic demand weaker, as falling housing prices erode consumer confidence, China is increasingly exporting surplus capacity from real estate–linked and industrial sectors. Is this export pivot (an even larger-scale increase in exports) a deliberate, preplanned structural response to a post housing growth model? 

And does the combination of excess scale, lower input costs, and currency dynamics (monetary flexibility and manipulation) now allow China to penetrate export markets that were previously inaccessible? 

Does this open up arbitrage opportunities that could require the United States to impose tariffs, or potentially trigger tariffs globally if it wanted to combat China's strategy?

Question 3A: Steel and Input Prices: Overcapacity built during the property boom has generated a surplus of inputs such as steel, pushing prices down internationally. From a U.S. perspective, do tariffs on these goods function not merely as protectionism, but as a mechanism to compress China’s trade surplus and reduce its fiscal capacity to subsidize industries that lack sufficient domestic demand? 

Given China’s scale advantage, does the ability to first absorb industries domestically and then export at mass scale—often with an unbeatable cost structure and without bearing first-mover intellectual property costs—create a structural justification for targeting inputs like steel? Question 4A: Self-Reinforcing Scale Advantage and the Limits of Free Trade: Assume China’s scale—low costs, mature production ecosystems, fiscal support, and currency stabilization techniques—enables export expansion beyond absolute cost advantage. 

Does this create a self-reinforcing export loop, whereby initial success in one sector enables subsequent waves of export capability that can overwhelm and destabilize mature domestic industries in importing economies? Could surplus profits and state-directed capital from steel and other industrial inputs be redeployed into emerging technologies for export, simultaneously pressuring multiple sectors?

Are they already doing this?

In this context, would free trade with China be stabilizing or destabilizing for Canada given the asymmetry between market economies and state-controlled exporters? Which fiscal posture for Canada best supports resilience—broad expansionary spending or fiscal conservatism—and what level of foreign investment received and export development would Canada require to remain competitive?

Without a defense is Canada more tilted towards financialization? 5A: U.S. Strategic Response: Should the U.S. trade response be understood primarily as a strategy to prevent China’s trade surplus from relieving its fiscal stress, given China’s relative limitations in attracting private capital compared with the U.S. at this time?

Do increased trade restrictions further limit China’s access to private capital by signaling to investors that the safest place for production intended for the U.S. market is actually within the U.S.? Could this, combined with weak domestic demand and a slow property recovery, further strain China’s fiscal resources?

For the U.S., does this trade and tariff strategy justify accepting short-term domestic financial losses in order to constrain long-term strategic exposure?

How does this challenge the application of traditional economic models? Are we moving beyond traditional comparative advantage toward a framework in which global capital flows to the most “free-standing” domestic economies capable of exercising importer power?

Question 6B: Unlike China, Canada’s housing growth was perhaps driven by financialization and sustained immigration, rather than state led construction and mass internal migration. The duration and end positions of these cycles differ, yet in both cases governments struggle to maintain confidence in the sector.

In Canada, the resulting household debt overhang and worsening affordability increasingly affect broader economic outcomes.

Had real-estate asset prices been moderated through earlier intervention—even in a low-interest-rate environment—and had immigration been more selective and continuous, aligned with housing and infrastructure capacity, might outcomes have differed?

Improved affordability may have supported stronger integration and social cohesion. In this context, do today’s social divisions appear less accidental and more predictable outcomes of a housing-financialization cycle amplified by mass immigration?

Now, as Canada begins to feel the effects of slowing immigration, does housing become more tilted toward government intervention and less reliant on pure free market forces?

Question 7B: Government Spending as a Replacement Growth Channel: With immigration growth slowing and financialized housing constrained, can increased government spending on housing and infrastructure realistically replace the growth once generated by population inflows and credit expansion?

Is there meaningful scope for public–private partnerships, and what lessons—if any—can be drawn from European housing and infrastructure models? How might ongoing land rights controversies with First Nations affect the feasibility of such government partnerships?

Beyond affordability, how can GDP growth be restored under these conditions, or is it a direct tradeoff where short-term price appreciation will be capped by government intervention?

Would immigration need to be re-accelerated to support housing demand, or is it more realistic to reposition housing as a primarily social and affordability-focused sector rather than a core driver of GDP growth?

Finally, absent real wage growth, could stagnation or structural contraction in housing contribute to deflationary pressures, and is it prudent for governments to impose soft prices on the supply side?

Question 8B: Public Capital Deployment and Optimal Policy Design; If government spending is to become a key lever for growth in housing and infrastructure, what is the most effective deployment strategy—direct government construction, incentives for private-sector developers, or a mix of both?

How can Canada avoid replicating the late-cycle distortions observed in China’s housing sector, where excess supply, credit misallocation, and scale-driven imbalances created systemic vulnerabilities?

Additionally, how should policy account for demographic trends, slowed immigration, and the current household debt overhang? Should there be a bias toward economic objectives, social objectives, or can both be achieved simultaneously?

Question 9C: Currency Management and Export Competitiveness: To what extent does China’s currency management amplify its export competitiveness when combined with scale and surplus capacity, and how does this affect global trade balances and exporter power? 

With lowering foreign investment in housing and growing export volumes, the currency might be expected to depreciate more. By holding its value through intervention, does China gain an additional advantage?

Does this dynamic create a need for countries like Canada to leverage alternative monetary policy tools—especially when fiscal constraints are already politically stretched—to support targeted sectors or segments of the economy, such as housing, through government indirect price-setting? 

Is this a monetary advantage? 

Could the effects of interest rates be segmented intentionally across key sectors to allow greater flexibility in responding to both China’s export dominance and U.S. trade measures?