Mark Williams, chief Asia economist at Capital Economics, estimates that China still has about 30 million unsold properties, which could house 80 million people. That’s nearly the entire population of Germany.
Here’s a look at some of those projects, and how the problem first originated.
Real estate and related sectors are a massive part of China’s economy, accounting for as much as 30% of GDP. The proportion of economic output related to construction and adjacent activities is “far higher than in other major economies,” according to Williams.
For decades, that has helped the country sustain rapid economic growth.
But for years, critics have questioned whether that engine of growth was creating a ticking time bomb for the world’s second largest economy. That’s in part because of the massive debt many developers took on to finance their projects.
As China’s most indebted developer, Evergrande has become the poster child of unsustainable growth, with more than $300 billion worth of liabilities.
In a recent report, Zhu wrote that 12 Chinese real estate firms defaulted on bond payments totaling about 19.2 billion yuan (nearly $3 billion) in the first half of the year.
“This accounted for near 20% of total corporate bond defaults in the first six months of the year, the highest across all sectors” in mainland China, she added.
The pandemic brought activity to a temporary standstill. But construction later roared back to life as China reopened, and the country’s property market enjoyed a brief rebound.
Since then, however, the market has sputtered again. And there’s no sign of immediate relief.
Over the last few months, “measures of price growth, housing [construction] starts and sales” have tapered off considerably, Zhu noted. In August, property sales, as measured by…
Read More: Evergrande crisis shines a light on China’s millions of empty homes