Real estate and related industries have driven an outsized 25 percent of China’s gross domestic product over the last decade-plus and some 40% of global commodity demand.
Now add-debt-and-stir is following the time-worn playbook with imploding prices and participants. This has implications for global demand, credit and property markets, particularly in countries like Canada that saw significant capital inflows from China as bubbles billowed in both countries. Now, with prices falling and Chinese developers in bankruptcy, Chinese households no longer view housing as a safe investment. See: An Even Bigger Housing Crisis Threatens China’s Economy:
“The whole industry is in trouble,” said Kenneth Rogoff, an economics professor at Harvard University, adding that the problems are particularly severe in smaller and medium-size cities. Years of overbuilding have resulted in a huge oversupply of homes, and there will need to be an adjustment in the property market, he added. “How do you prevent the Chinese population from going into a panic mode since most of its wealth might collapse? It’s not easy,” Rogoff said.
It’s worth remembering that housing downturns have coincided with the harshest recessions historically. The segment below gives some boots-on-the-ground context.
Dozens of homebuyers in Tongchuan, a city in northwestern China’s Shaanxi province, are demanding police action as the presale flats they bought years ago remain unfinished shells. The so-called “rotting” or unfinished homes in China have become more common since a property slump in 2021, which has seen some property developers go bankrupt, and others left in massive debt. Here is a direct video link.
