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Newsweek
5 hours ago
- Business
- Newsweek
China's Property Market Death Spiral
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Chinese property giant Evergrande, the developer whose fall triggered a crisis in the country's property sector, said on Tuesday that it will delist from the Hong Kong stock exchange later this month. The announcement was another nail in the coffin of China's once-thriving property sector, which turbocharged the economic growth of the country over the past few decades. "Delisting means no recovery of the sector," Zhaopeng Xing, senior China strategist at ANZ Bank, told Newsweek. If anything, things will continue to go downhill for China's property sector, he said. Whatever Happened to Evergrande? Evergrande was once the biggest builder in the world's second-largest economy, China. Then it became the most indebted real estate developer in the world. The company rode the wave of China's property sector's rapid expansion over the past few decades, accumulating excessive levels of debt that eventually became problematic when the country's regulators implemented changes to limit developers' borrowing. After a few bad years, Evergrande defaulted on its debt in 2021, causing a domino effect in the country's entire property sector. The company has actually become a bit of a symbol for the crisis in China's property sector, which is facing drastically slower growth. "There have been at least several dozen similar cases in which construction companies can no longer continue to run business," Kent Deng, professor of economic history at the London School of Economics (LSE), told Newsweek. "A common symptom is that such companies purchased land leases at distorted high prices from the government but were unable to pass the cost onto home buyers." "China's real estate woes are entirely self-inflicted," David Lubin, the Michael Klein senior research fellow in the Global Economy and Finance Programme at the Chatham House think tank, told Newsweek. Photo-illustration by Newsweek/Associated Press/Canva "Starting in 2020, Chinese authorities began an effort to wean the economy off its intense reliance on real estate investment," he said. "This was partly for prudential reasons, since the economy's dependence on real estate investment had become almost an absurdity: Real estate investment was a bit below 15 percent of Chinese GDP in 2020, suggesting a highly imbalanced economy—too many eggs were in the property basket." But another reason for the authorities' clampdown on real estate, Lubin said, was more strategic. "By weaning the economy off its dependence on property, that could free up capital and credit resources to move to areas of the economy—high-tech manufacturing, in particular—that had grown in importance as far as the authorities were concerned," he said. A couple of years ago, Evergrande still thought it could bounce back. But a $23 billion debt restructuring plan fell apart in 2023 after an investigation was launched into the company's CEO, Hui Ka Ya, once the second-richest man in Asia. In January 2024, Evergrande was handed a liquidation order after a court ruled that it had been unable to come up with a realistic restructuring plan for its debts, which at the time amounted to more than $300 billion. "We are talking about a business network which has been deeply involved in land deals with corrupt officials at all levels and huge real estate speculations in all major cities in China. It was asked to stop trading in 2024," Deng said. On August 8, Evergrande received a letter from the Hong Kong stock exchange saying they would be delisted as it had failed to resume trading by July 28. What Does This Mean for China's Property Sector—And for China's Economy? "Evergrande's demise was set in stone a while ago, so the delisting is just a formal confirmation of what we already knew. But recent data suggest the sector still hasn't reached a bottom unfortunately," Benjamin Bennett, Asia-Pacific investment strategist at Legal And General Investment Management, told Newsweek. "House prices continue to fall and sales are still very weak. So I think there's more pain to come for developers." Evergrande's delisting "confirms that the good days of the Chinese property market are finally over," Deng said. "In the past three decades the supply side has over-expanded far too much. In one account, there are 600 million permanent buildings in Mainland China, or one building for every two Chinese. There is no possibility for the domestic consumers to absorb this over-supply," he explained. There are, at this point, many more homes in the Chinese market than demand can absorb. "There are plenty of houses in the market on the one hand, and low marriage rates and low birthrates on the other make low cost renting available everywhere," Deng said. "So, the demand for newly built properties has been stagnant for at least 10 years now." Essentially, the construction boom that boosted the Chinese property sector and the country's entire economy seems solidly a thing of the past, never to be repeated—at least not anytime soon. Home sales have fallen drastically since the COVID-19 pandemic, and, in August 2024, China reported its biggest annual decline in property values in nine years. The unstoppable downfall of the country's property sector, with little chance of recovery, could continue to have an impact on the Chinese economy, which has for so long relied on it for growth. "Selling lease-holding land plots has been an easy way to raise government revenues and then pass the costs onto ordinary consumers who will then pay everything back in the next 30 years," Deng said. "This is a long-term scheme for both parties. China will face the consequences in the next generation's time." Can China's Property Sector Downfall Be Stopped? According to Lubin, there are "mild signs of stabilization" in China's real estate market, even though they do not represent a significant shift. "The official 'real estate climate index' troughed in May 2024 and has been rising modestly since then, but nothing to write home about, and real estate price inflation is still negative," he said. "The sector remains under a lot of pressure, therefore, and there's something of a vicious circle at work: Real estate is weak because household confidence is weak because real estate is weak," Lubin said. "That kind of circle can only be broken by policy intervention, but for now it seems that the authorities remain deeply unwilling to deliver anything like a 'bazooka' to lift household confidence." The Chinese government said it is determined to make new efforts to stabilize the property sector's decline soon. But experts are skeptical of how big their impact could be, whatever they decide to do. "One should not overestimate the ability of the Chinese state in stabilizing China's property market's downturn, simply because the government is unable to buy up all the unsold properties and bail out all the mortgage breaches," Deng said. The bottom line, according to Deng, is that "buildings cannot be physically exported from one country to another and thus have to be dealt with by the domestic population," he said. "My own estimation is that it will take China 30-40 years to get back to its feet," he said. "A great many investors will go broke." Xing agrees with this gloomy vision for China's property sector's future. "China urbanization is slowing and is now close to 70 percent," he said. "The room for builders is getting limited. I do not expect any strong policy support for property development going forward. Policy priority changes to urban renewal." Xing and his team estimate that new home sales in the country will decline by another 30 percent in the next few years.
Mint
5 days ago
- Business
- Mint
China Bond Rout Deepens as Rally in Local Stocks Gathers Steam
A selloff in China's bond market is accelerating, sending futures on ultra-long debt to a four-month low as a bull run in local stocks builds momentum. Futures on 30-year sovereign notes fell as much as 0.7% Thursday, extending this week's drop to 1.5% at the low as a gauge of onshore equities reached its highest point since October. The moves are less dramatic in the cash bond market, with yields on the same maturity government paper up one basis point. The world's second-largest bond market has come under increased pressure in the past month, thanks to easing US-China trade tensions and optimism that efforts to curb overcapacity and excessive price wars will pull the economy out of deflation. Dwindling expectations for further monetary easing in the short term, as well as the imposition of a tax on certain bond investments have also soured investor sentiment. Weighing on bonds is 'asset allocation rotation as equities have fared well lately and there may be a gradual recovery of some investor risk appetite,' said Lynn Song, Greater China chief economist at ING Bank. 'To support the bond market, we would need to see measures such as cuts to the benchmark rate.' While the traditional see-saw effect between stocks and bonds appears to be the driving force behind investors' decisions at the moment, how far the debt market selloff can go may ultimately hinge on China's growth momentum. Official data released Wednesday showed a key measure of lending at Chinese banks contracted for the first time in two decades in July, with broad credit growth also slowing. That said, the amount of cash already sloshing around the system will likely continue to drive flows to stocks. The overnight funding benchmark in China's money market dropped to a two-year low earlier this month. 'The loose liquidity is driving risk-on sentiment,' said Zhaopeng Xing, senior China strategist at Australia & New Zealand Banking Group. Panic redemptions by bond funds 'has already started.' With assistance from Iris Ouyang.
Newsweek
19-06-2025
- Business
- Newsweek
China's Housing Market Facing Long Slump
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. The devastating property crisis that broke out in China after the collapse of giants like Evergrande is far from being resolved, experts say, as new home prices in the country continue falling and new construction projects get cut down. The sector has gone "from a free fall" in the years following Evergrande's default in 2021 "to a gradual fall" today, Zhaopeng Xing, senior China strategist at ANZ, told Newsweek. What Is Happening In China's Property Market? China's property market has propelled the country's explosive economic growth over the past few decades, single-handedly lifting hundreds of millions of Chinese people out of poverty and into the middle class. But since the collapse of giant developers like Evergrande and Country Garden, the sector has been sinking, threatening to drag the Chinese economy down with it. Despite efforts from the government to revive the struggling property sector, which was once the country's economic powerhouse, recent data show that it is still unable to walk on its own feet and demand is failing to pick up. High-rise buildings under construction stand behind a Chinese national flag waving in the foreground, as cranes continue work on partially completed towers on May 07, 2025, in Chongqing, China. High-rise buildings under construction stand behind a Chinese national flag waving in the foreground, as cranes continue work on partially completed towers on May 07, 2025, in Chongqing, home prices fell 0.22 percent in 70 Chinese cities in May, the largest decline in seven months, according to figures from the National Bureau of Statistics. Existing home prices fell by an even bigger 0.5 percent, marking the steepest decline in eight months. In the same month, residential sales by value dropped 6.1 percent year-on-year, while real-estate investment plunged 12 percent from a year earlier. Kent Deng, professor of economic history at the London School of Economics (LSE), told Newsweek that there has been "no real recovery so far" in the Chinese market. "It is a story of housing oversupply," he said. "China has had 600 million permanent buildings, roughly two people a building. It will take 30-50 years to absorb them," he added. This same oversupply is leading prices to fall and new construction projects to be cut down. What Does This Mean for the Country? The latest data show that even the Chinese government policy interventions are failing to make a real dent in the situation facing homebuyers in the country, who are struggling with growing economic uncertainty linked to the trade war with the U.S. and income instability. But the central government seems determined to try to support the sector, with Premier Li Qiang pledging action during a state council meeting last week, according to state broadcaster CCTV. They might have a hard time getting the property sector out of the current slump, experts said. "Recovery will be slow as people do not have more purchasing power to buy new houses," Deng told Newsweek. The property sector plays an outsize role in China's economy, contributing to nearly a third of its GDP. Further contractions could continue hurting the country, experts said. "China's property market values 600 trillion yuan [$83.5 billion]," Xing said. "A 10-percent price fall means 60-trillion-yuan loss to households. The negative wealth effect will curb consumption and investment," he said. According to Xing, new development will not pick up in the next decade in China "as urbanization will likely come to an end by 2035," he said. In a report released on Monday, Goldman Sachs experts said that demand for new homes in China is likely to remain substantially below its 2017 peak over the next few years, especially as the country's population shrinks and continues aging. "We calculate that annual demographic demand in urban China will average only 4.1 million housing units per year in 2025-2030, compared to 9.4 million units per year in the 2010s," researchers wrote in the report shared with Newsweek. "It is striking that China's demographic demand for new urban housing likely halved within a decade." It could be a dramatic change for a country that has built its economic backbone on the property sector. While China has been trying to shift its economy away from the housing market, the result has not been good, Deng said, "because investment opportunities are very limited outside the housing market." "China will have to switch the property sector from a construction-based model to a service-like model. The transformation will change a lot of policies including land finance," Xing said. "The sector will be like real estate in other developed economies; 75-percent value added will be housing rents, not new home sales," he said. "The economy will shift away from property construction, but not real-estate services. The latter will play a bigger role in the economy."
Business Times
20-05-2025
- Business
- Business Times
China ran record budget deficit with spending blitz amid tariffs
CHINA'S fiscal stimulus pushed its four-month budget deficit to a record high, as the government ramped up support for the economy during an escalation in its trade conflict with the US. The broad deficit reached 2.7 trillion yuan (S$484 billion) in January to April, the most ever for the period, according to Bloomberg calculations based on data released by the Finance Ministry on Tuesday (May 20). The shortfall swelled by more than 50 per cent compared with a year earlier. It's the clearest evidence yet that Beijing shifted into a higher gear in deploying this year's planned fiscal stimulus to help the economy weather external shocks. US tariffs on most Chinese goods rose to a prohibitively high level of 145 per cent in April before the two countries agreed to a truce earlier this month. Outlays soared against the backdrop of stabilising earnings. Total income in China's two main fiscal books reached 9.32 trillion yuan in January to April, a decline of only 1.3 per cent year on year after a much steeper drop during the first quarter. Total expenditure rose 7.2 per cent to 12 trillion yuan, the data showed. That number combines spending under the general budget, which includes mainly everyday outlays, with expenditure in the government fund budget, which is more weighted towards capital investment projects. Looking ahead, the urgency of further fiscal support is waning after an agreement by China and the US to temporarily lower tariffs levied against each other's products. The truce, along with decent economic activity numbers for April, has led a few major international banks to raise their forecasts for China's growth this year and dial back expectations of additional stimulus by the government. Tuesday's fiscal figures have given them more reasons to bet on the government delaying new supportive measures. 'Government spending was accelerating while revenue shows signs of stabilisation,' said Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group. 'The need for expanding fiscal deficit in the middle of the year has declined.' BLOOMBERG
Yahoo
20-05-2025
- Business
- Yahoo
China Ran Record Budget Deficit With Spending Blitz Amid Tariffs
(Bloomberg) -- China's fiscal stimulus pushed its four-month budget deficit to a record high, as the government ramped up support for the economy during an escalation in its trade conflict with the US. America, 'Nation of Porches' NJ Transit Train Engineers Strike, Disrupting Travel to NYC NJ Transit Makes Deal With Engineers, Ending Three-Day Strike The broad deficit reached 2.65 trillion yuan ($367 billion) in January-April, the most ever for the period, according to Bloomberg calculations based on data released by the Finance Ministry on Tuesday. The shortfall swelled by more than 50% compared with a year earlier. It's the clearest evidence yet that Beijing shifted into a higher gear in deploying this year's planned fiscal stimulus to help the economy weather external shocks. US tariffs on most Chinese goods rose to a prohibitively high level of 145% in April before the two countries agreed to a truce earlier this month. Outlays soared against the backdrop of stabilizing earnings. Total income in China's two main fiscal books reached 9.32 trillion yuan in January-April, a decline of only 1.3% year-on-year after a much steeper drop during the first quarter. Total expenditure rose 7.2% to 11.97 trillion yuan, the data showed. That number combines spending under the general budget, which includes mainly everyday outlays, with expenditure in the government fund budget, which is more weighted toward capital investment projects. Looking ahead, the urgency of further fiscal support is waning after an agreement by China and the US to temporarily lower tariffs levied against each other's products. The truce, along with decent economic activity numbers for April, has led a few major international banks to raise their forecasts for China's growth this year and dial back expectations of additional stimulus by the government. Tuesday's fiscal figures have given them more reasons to bet on the government delaying new supportive measures. 'Government spending was accelerating while revenue shows signs of stabilization,' said Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group. 'The need for expanding fiscal deficit in the middle of the year has declined.' Why Apple Still Hasn't Cracked AI Anthropic Is Trying to Win the AI Race Without Losing Its Soul Microsoft's CEO on How AI Will Remake Every Company, Including His Cartoon Network's Last Gasp DeepSeek's 'Tech Madman' Founder Is Threatening US Dominance in AI Race ©2025 Bloomberg L.P.
