China Evergrande’s Collapse
What to Know Developer Ordered to Liquidate Effect on Global Economy Why Evergrande Crashed
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China’s Real Estate Crisis ‘Has Not Touched Bottom’
The forced liquidation of China Evergrande epitomizes the sector’s struggles: Nationwide, sales are down and millions of homes have been paid for but not delivered.
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An Evergrande showroom in 2021. By one estimate, China has 20 million apartments that have been paid for but not delivered. Credit...Gilles Sabrié for The New York Times
By Daisuke Wakabayashi and Claire Fu
Reporting from Seoul
Jan. 30, 2024, 12:01 a.m. ET
The unwavering belief of Chinese home buyers that real estate was a can’t-lose investment propelled the country’s property sector to become the backbone of its economy.
But over the last two years, as firms crumbled under the weight of massive debts and sales of new homes plunged, Chinese consumers have demonstrated an equally unshakable belief: Real estate has become a losing investment.
This sharp loss of faith in property, the main store of wealth for many Chinese families, is a growing problem for Chinese policymakers who are pulling out all the stops to revive the ailing industry — to very little effect. The troubles of the country’s real estate sector were laid bare on Monday when a Hong Kong court ordered China Evergrande to wind up operations and liquidate the company, which is saddled with over $300 billion in debt.
Like the industry it once ruled, Evergrande limped along for two years after defaulting on payments it owed investors. Evergrande, lacking the cash to pay creditors, tried to exude confidence that its apartments remained a sound investment. The market would surely bounce back, as it had during past downturns.
But the downturn, already the longest on record, is not only dragging on — it is accelerating.
In 2023, China’s housing sales fell 6.5 percent. In December alone, sales were down 17.1 percent from a year earlier, according to Dongxing Securities, a Chinese investment bank. Investment for new projects also slowed. Real estate development fell 9.6 percent last year.
“The market has not touched bottom yet,” said Alicia Garcia-Herrero, chief economist for the Asia-Pacific region at Natixis. “There is still a long way to go.”
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Daisuke Wakabayashi is an Asia business correspondent for The Times based in Seoul, covering economic, corporate and geopolitical stories from the region. More about Daisuke Wakabayashi
Claire Fu covers China with a focus on business and social issues in the country. She is based in Seoul. More about Claire Fu
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