China’s Property Crisis Grinds On and Continues to Hold Back the Economy

Jan 24, 2026 - 11:02

Updated: 4 months ago

China’s Property Crisis Grinds On and Continues to Hold Back the Economy

Commentary

China’s by now infamous property crisis is entering its fifth year. It continues to weigh on the country’s economy, holding back homebuilding, consumer spending, and investments in business expansion and modernization.

Recent news suggests that this crisis shows no sign of abatement and will persist through 2026 and 2027 as well.

Little in recent news from Beijing’s National Bureau of Statistics or other reliable sources offers anything upbeat on this matter. Some months ago, a scrap of hope emerged as several troubled property developers managed to reschedule their debts and put their finances on a more sustainable basis. Now, the news makes clear that those adjustments were insufficient to turn things around.

Top real estate developers—private and state-owned—continue to shrink. The number of such developers with annual sales of more than 100 billion yuan (about $14 billion)—the so-called 100-billion-yuan club—has shrunk to just 10 companies from 17 as recently as 2023. Only one of those remaining, Jinmao Holdings, reports any growth during the past year, and the pace is meager.

Over the 11 months of 2025 for which data are available, new home sales have continued to fall. A Citibank report indicates that developers expect home sales to fall by another 16 percent this year. Even Vanke, long regarded as the most prudent and financially sound developer in China, narrowly avoided default on a 2 billion yuan (about $284 million) note just last month.

Looking forward, developers have noted very low confidence among potential homebuyers. This distinct lack of enthusiasm is hardly surprising. The crisis, by depressing property values, has cut deeply into households’ net worth and accordingly created a nationwide reluctance to spend on anything.

The growth in consumer spending has slowed to a crawl. And since property values continue to decline, there is no relief in sight on this front. At the same time, the resulting slowdown in the pace of overall economic growth has more or less stalled the pace of capital spending, especially by private businesses and by state-owned enterprises not especially favored by the planners in Beijing. And since in those favored areas—largely technology, medical products, and shipbuilding—state support has created surplus productive capacity, capital spending even in these areas has begun to show signs of slowing.

Meanwhile, preferences among remaining property developers for big cities would seem to be planting the seeds of future trouble. An understandable caution has led to the remaining aspects of real estate development being directed toward China’s larger, richer cities, notably Hangzhou, Shanghai, and Beijing. That might seem reasonable in the circumstances and make way for at least some growth.

Still, the neglect of the rest of China, especially its vast hinterland, will reinforce the already existing and troubling tendency for China to develop a two-tier economy, with concentrations of wealth surrounded by lagging, less economically dynamic areas.

It is common, even within government circles, to date the start of China’s real estate troubles to 2020. That was the year when Beijing instituted its “three-red-lines policy” that tightened credit for property developers who had become exceedingly aggressive and highly dependent on debt. Beijing’s goal was reasonable. Housing development had grown to more than 30 percent of the country’s gross domestic product (GDP), an outlandish figure considering that in most of the developed world, homebuilding seldom exceeds 20 percent of GDP.

But if Beijing’s goals were understandable, its planners could be faulted in two ways. First, most of the excesses that prompted the three-red-lines policy were themselves a product of state policies. Prior to 2020, Beijing had made credit readily available to developers and further promoted aggressive behavior by encouraging local governments to partner with developers, sometimes in very out-of-the-way places.

Second, Beijing implemented its restraint so suddenly that developers, who had by then become accustomed to support, had no time to adjust. It is little wonder then that many went bankrupt and brought on the problems that have plagued China’s economy since.

Now, it seems China will have to spend another year or two, or maybe more, working through the property crisis and all the economic ills it has precipitated. Worse for China is that these difficult adjustments must be made in the face of a growing hostility to China trade in the United States, Europe, and Japan, brought on, it must be noted, in part by another mistake on Beijing’s part—its intransigence when these trading partners complained about its unfair trading practices.

The economic and financial troubles are not going away, and the Chinese Communist Party is largely responsible for them.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.