Chinese real estate developers desperate for a government lifeline are getting the opposite—survival of the fittest. According to Chinese Minister of Housing and Urban-Rural Development Ni Hong, “real estate companies that are seriously insolvent and have lost the ability to operate…must go bankrupt.”
When the Chinese government started cutting off debt financing to the country’s massive property developers in 2020, it sent the $5 trillion real estate sector into a tailspin. Without easy access to cheap government cash, builders quickly ran out of money, leaving apartment buildings half-finished and sinking property values. Evergrande, the country’s largest developer, was worth $50 billion in 2017—but after a near-total collapse, its debt is now trading at less than one cent on the dollar.
Speaking at a press conference held alongside China’s annual parliamentary meetings on Saturday, Ni said that the government was drawing a line in the sand on bailouts—and that when it comes to legal recourse, property developers guilty of mismanagement are on their own.
“Those who commit acts that harm the interests of the masses will be resolutely investigated and punished in accordance with the law,” Ni said. “They will be made to pay the due price.”
The downturn is a reversal from the past. At one point, China’s property sector contributed about 30% of the country’s entire GDP. Fitch Ratings last November called Chinese real estate the “most important single sector of the global economy.”
Since then, China’s slumping property sector has weighed heavily on its national economy. The massive debt burdens developers took on to pay for billions in new construction came back to bite them during the pandemic, which spiraled into a bona fide crisis. Homeowners were paying mortgages on new apartments that weren’t finished, which sparked massive mortgage boycotts that squeezed developers even more. The $50 billion developer Evergrande is being liquidated in a Hong Kong court right now, and Country Garden, the country’s largest private developer, missed a $200 million debt payment last month. Total Chinese property sales were down almost 20% in 2024, across both massive national and smaller regional developers. (State-owned companies control almost 90% of the national market.)
The property sector’s downturn led the IMF to downgrade its growth estimates for the Chinese economy.
“Chinese authorities have taken resolute actions to address the risks from the property sector since the start of the pandemic,” reads a February 9 IMF report. “The key challenge now is to smooth the transition of the sector to a smaller, more sustainable size amid unresolved financial distress among developers, weakened homebuyer confidence, and a backdrop of large inventories and structurally declining demand.”
Officials generally declined to comment on the property sector during the weeklong parliamentary meeting, an annual event where media is given a rare window into government proceedings. Aside from the remarks above, Ni largely refrained from commenting directly on the collapse of the property sector, spending most of his time commenting on urban safety and infrastructure initiatives like gas pipelines and elevator retrofits—the panel he was speaking on was themed around “livelihood.” In his remarks, Ni focused on building affordable housing and government-sponsored urban renewal projects as potential solutions.
“Many issues we face are dilemmas, but as hard as they might be, as long as the people need it, we will find a way to solve these issues for the benefit of the people,” Ni said.
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