The one-time billionaire who came to personify the boom and bust of China’s property market was sentenced to life in prison last week by a Chinese court.
But the collapse of the sector, entering its sixth year, remains a drag on the world’s second-biggest economy, a pain point for millions of households and a force for export-reliant growth and trade friction for China.
Many angry homeowners and creditors — in comments that went initially uncensored on Chinese social media — asked why Hui Ka Yan, once Asia’s richest person and the founder of China Evergrande, was not given the death penalty after being convicted of crimes ranging from misuse of funds to bribery.
Six years after China’s financial regulators cracked down on the heavily leveraged property sector, the pain continues. Millions of partially built properties sit derelict across China, a recovery in new-home prices in the biggest cities, like Beijing and Shanghai, has stalled, land sales continue to plunge and declines are accelerating in property sales and construction.
In smaller, inland cities, second-hand home prices are down almost a quarter from 2020 levels, a brake on consumption.
China’s economy grew 4.3% in the three months to June from the same quarter last year, the slowest in more than three years.
And with the one-time engine of domestic demand in reverse, China is increasingly relying on exports for growth. The more than doubling of China’s trade surplus since 2019 has escalated trade tensions with the European Union and the United States and driven concerns about a “China Shock 2.0” as exports displace local industries for trading partners, including in the Global South.
NO EASY FIXES
“The problem is systemic, and there’s not much you can do about it,” said Sam Radwan, chief executive of Chicago-based real estate consultancy Enhance International. “You have more homes than households – second homes were used as an investment by over a third of the population.”
Evergrande defaulted in 2021 and began liquidation in 2024. Competitor Country Garden (2007.HK), defaulted in 2023 and has not made any land purchases since then, while China Vanke (000002.SZ), is seeking to extend some bond repayments and has replaced most of its top management with executives from state-owned enterprises.
President Xi Jinping has sought to redirect bank credit and state support from real estate to strategic tech industries, like robotics and semiconductors. But those emerging sectors remain too small to offset the drag from a continued housing slump, analysts say.
“Growth and the benefits of growth are much more narrowly distributed throughout the economy,” said Max Zenglein, senior economist at the Conference Board Asia. “That’s a key reason why consumption isn’t picking up.”
Since most private property firms have defaulted, state-owned property developers now dominate. Market participants expect the property sector to become more subject to state oversight.
“The main consideration is who is behind it — whether it is a central or local state-owned enterprise,” said a loan officer at a major state-owned bank. “In practice, banks have largely stopped lending to private developers for a long time.”