China's Real Estate Crisis: Five Years of Struggle with No End in Sight
China's real estate market, once a symbol of economic prosperity, is now facing a prolonged downturn. The delisting of Evergrande from the Hong Kong Stock Exchange marks a significant moment in this ongoing crisis.
Real EstateChinaEvergrandeProperty MarketEconomic CrisisReal EstateAug 26, 2025
How times have changed. Now a symbol of China’s real estate boom and bust, Evergrande was delisted from the Hong Kong Stock Exchange on Monday. This delisting comes four years after the company first warned that it was facing financial difficulties and two years after it sought bankruptcy protection. Evergrande’s collapse, with $300 billion in debt, mirrors the slow and painful unwinding of China’s property sector.
Government policies have managed to stave off a sudden crash, but they have instead delivered a grinding slowdown. The housing downturn has not delivered the devastating shock that the United States suffered in the 2008 financial crisis, but it has been hanging over the economy for five years with no end in sight. Last month, new home prices dropped at their fastest pace in nine months, and the prices of secondhand homes continued to slide, according to the National Bureau of Statistics of China.
As the slump continues, the government has stepped in to prop up just enough indebted property companies to prevent a broad collapse. China Vanke, one of the country’s biggest developers, has repeatedly leaned on its top shareholder, the state-owned firm Shenzhen Metro, for loans to cover obligations from its $51 billion of debt. Shenzhen Metro has extended $3.4 billion over nine loans to Vanke this year. Vanke reported on Friday that it lost $1.7 billion in the first six months from January through June, 21 percent worse than a year earlier.
When Beijing rolled out rules in 2020 to curb the excessive borrowing of property developers, it kicked off a downward spiral, pushing many real estate firms to the brink. However, the government has stopped short of an industry-wide bailout, instead taking steps such as relaxing purchase restrictions and encouraging banks to lend more. Andrew Collier, a senior fellow at the Harvard Kennedy School, said the result was that the “pain is going to go on for a very long period of time.”
It’s a different approach from the one adopted in China’s last significant real estate downturn, around 2015, when Beijing spent hundreds of billions of dollars to pay residents cash to trade in dilapidated shacks in smaller cities and towns. While that policy revived the market, it also unleashed another building boom fueled by developers taking on excessive debt.
While some of the largest developers are still trying to restructure, many smaller ones have gone under. The downturn has devastated businesses and jobs in sectors that rose up around the real estate boom. The continuing property market slide comes at a vulnerable moment for the Chinese economy. A trade war has limited China’s ability to rev up its export engine, while consumer spending remains soft. The government is plowing money into semiconductors, robotics, and other technologies, but those investments are unlikely to pay off quickly enough to fill the hole left by a shrinking property sector.
It’s hard to overstate the real estate industry’s importance. At its peak, the sector accounted for roughly 30 percent of China’s economy. Proceeds from land sales to property firms filled local government coffers. Many Chinese households turned to real estate, believing it was a safe investment for their savings. The recent data is alarming. While new construction has slowed drastically, the inventory of available homes is growing, not shrinking.
Frequently Asked Questions
What triggered the real estate crisis in China?
The crisis was triggered by government rules implemented in 2020 to curb excessive borrowing by property developers, which led to a downward spiral in the real estate market.
How has the Chinese government responded to the crisis?
The government has taken steps to prevent a broad collapse by relaxing purchase restrictions and encouraging banks to lend more, but has stopped short of an industry-wide bailout.
What is the current state of the Chinese real estate market?
The market is experiencing a prolonged downturn with new home prices dropping at their fastest pace in nine months and a growing inventory of available homes.
How has the crisis affected other sectors of the Chinese economy?
The downturn has devastated businesses and jobs in sectors that rose up around the real estate boom, and it has also affected consumer spending and the export engine.
What is the future outlook for China's real estate market?
The outlook remains uncertain, with experts predicting that the pain will continue for a very long period of time due to the lack of a comprehensive bailout and the current economic vulnerabilities.
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