Inadvertently, the notorious real estate crisis under the rule of the Chinese Communist Party has entered its fifth year. This crisis continues to drag down the Chinese economy, hampering housing construction, consumer spending, enterprise expansion, and modernization investment.
Recent reports indicate that there are no signs of relief in this crisis, which is expected to persist into 2026 and 2027.
Recent information from the National Bureau of Statistics in Beijing or other reliable sources offers little optimism. A few months ago, some struggling real estate developers successfully restructured their debts, which brought a glimmer of hope for their financial sustainability. However, the current reports suggest that these adjustments are not enough to reverse the situation.
The number of large real estate developers, including private and state-owned enterprises, continues to decline. The number of developers with annual sales exceeding 100 billion yuan (approximately 14 billion USD) – known as the “100-billion-yuan club” – has dropped from 17 in 2023 to just 10. Among these 10, only Jinmao Holdings based in Beijing achieved marginal growth in the past year, with minimal growth rate.
In the first 11 months of 2025 with available data, new home sales continued to decline. A report from Citibank indicates that developers expect a 16% decrease in new home sales this year. Even Vanke, long considered one of China’s most cautious and financially stable real estate developers (headquartered in Shenzhen, Guangdong), nearly defaulted on a 2 billion yuan (about 284 million USD) note last month.
Looking ahead, developers note the exceptionally low confidence levels of potential homebuyers. This lack of enthusiasm is not surprising given that the crisis has depressed house prices, significantly weakened household net assets, and led to widespread consumer unwillingness to spend.
Consumer spending growth has significantly slowed down. Continued decline in house prices shows no signs of easing this trend. At the same time, this slowdown in overall economic growth, spurred by the crisis, has more or less inhibited capital expenditure, especially by private enterprises and state-owned enterprises less favored by Beijing planners. Subsidies in favored sectors such as technology, medical products, and shipbuilding have led to oversupply, indicating a slowdown in capital expenditure in those areas.
Meanwhile, the remaining real estate developers’ preference for major cities seems to be sowing seeds of future trouble. Out of understandable caution, remaining real estate development activities are primarily concentrated in larger, wealthier Chinese cities, notably Hangzhou, Shanghai, and Beijing. While this may seem reasonable in the current circumstances, it may exacerbate the existing economic polarization in China, with areas of concentrated wealth surrounded by economically lagging and less dynamic regions.
Even within the government, it is widely believed that the onset of China’s real estate woes can be traced back to 2020. That year, Beijing implemented the “three red lines” policy, tightening credit for real estate developers overly reliant on debt. Beijing’s goal was reasonable, considering that housing development had grown to over 30% of the country’s GDP, a startling figure compared to the rare instances in developed countries where housing construction exceeds 20% of GDP.
While Beijing’s goal was understandable, its planners also bear responsibility in two aspects. Firstly, much of the radical behavior that led to the implementation of the “three red lines” policy was already a product of national policies. Prior to 2020, Beijing provided ample credit to developers and further fueled this radical behavior by encouraging collaboration between local governments and developers (sometimes even in very remote areas).
Secondly, the sudden imposition of restrictions by Beijing left developers who were accustomed to government support with no time to adjust. Therefore, it is not surprising that many developers went bankrupt, triggering a series of economic issues that have been plaguing the Chinese economy since then.
It now appears that China may need another year or even longer to address the real estate crisis and the economic maladies it has caused. To make matters worse, China must navigate these difficult adjustments amidst increasing trade hostilities from economic entities like the United States, Europe, and Japan. It is noteworthy that this hostility partly stems from another mistake by Beijing – displaying a tough stance when these trading partners complain about its unfair trade practices.
The economic and financial challenges will not disappear on their own, and the Chinese Communist regime bears primary responsibility for this, which is beyond doubt.