China's real estate crisis isn't over yet, IMF says (2024)

FAQs

Is China real estate in trouble? ›

If you look at land sales, Chinese real estate is in dire shape. As a result, there was a two trillion yuan ($290 billion) decline in income from land sales last year. And that drop continued into the first two months of 2023.

New-home prices in China's 70 biggest cities rose in each of the first four months of the year, reversing a yearlong slide during the height of Covid restrictions. But the nascent rebound is losing steam. Growth in housing prices slowed in April. And the recovery has not been evenly dispersed.

Chinese households have grown reluctant to purchase new homes in the past year, as the now-defunct Covid curbs, falling home prices and rising unemployment have discouraged would-be buyers.

They're looking at whether the developers can generate enough cash from property sales. For all of 2023, S&P expects China developer sales to fall by about 3% to 5% — slightly better than the previously forecast 5% to 8% drop.

In play now in China, where around 70% of household wealth is in property, this phenomenon is weighing on the post-pandemic recovery of household consumption, which Chinese policymakers have vowed to make a more prominent driver of economic growth.

In the last 10 years, Chinese investors have bought US$188.6 billion worth of property in the US – more than a fifth of total foreign investment.

Studies have shown that for the past 40 years, housing supply has not kept pace with demand, resulting in a housing shortage ranging between 2 million and 6 million homes. Yet across America, a combination of recalcitrant homeowners and outdated zoning laws routinely block attempts to build more housing.

There are between 1.5 million and 6 million fewer homes in the U.S. than there are households ready to occupy them. The proximate cause of this mismatch isn't hard to discern: Over the past ten years, the number of housing units per 1,000 people in the U.S. has actually fallen.

The curves displaying their population trajectories over time have very different shapes. China's population is, in fact, already declining.

To help solve the debt crisis among property developers, Beijing will set up a rescue fund of up to 300 billion yuan (US$44.3 billion), starting with 80 billion yuan. The money may be used to help developers complete unfinished projects, and purchase units which can be let out as rental housing.

Why is China on the verge of economic collapse? ›

China's grotesquely overinflated property bubble is at perpetual risk of bursting. A youth-unemployment crisis plagues its major cities. A perennially underpaid labor force is struggling to prop up consumer demand. And the demographic collapse wrought by the one-child policy has just begun.

China's economy is slowing down as it adapts to a punishing zero-Covid strategy and weakening global demand. Official growth figures for the July to September quarter are expected soon - if the world's second-largest economy contracts, that increases chances of a global recession.

China does not permit the private ownership of land. Instead, private parties may obtain the right to use property for up to seventy years. These parties own the structures on the land but not the underlying real estate.

No Signs of Construction Recovery

“We indeed see stabilization but at a weak level” this year for the housing market, Sonali Jain-Chandra, China mission chief for the International Monetary Fund, said Thursday in Beijing, adding real estate investment will still be a drag on growth this year.

China Earnings Expected to Rebound in 2023 as U.S. and Global Earnings Slow. As of November 23, 2022. 2022 and 2023 values are consensus forecasts. Past performance is not a reliable indicator of future performance.

1- United States: Located in North America, the United States ranks third in the world in terms of size and population. It has again beaten China, to become the richest country in the world.

China dominates every aspect of the bilateral economic relationship, as a net exporter, net creditor and net investor, despite Russia long being a richer country than China.

China owns roughly 384,000 acres of U.S. agricultural land, according to a 2021 report from the Department of Agriculture.

Who Is the Largest Landowner in the U.S.? The largest landowners in the United States are the Emmerson family, with 2,330,000 acres of land.

Canadian investors lead this pack, by a long shot, with nearly 9.4 million acres of U.S. land — more acreage than 44 of the top 50 foreign landowners combined, according to the report. (These people own the most land in America.)

Can a US citizen own a house in China? ›

The answer is yes, foreigners are allowed to purchase property in China! The essential requirement is that you have studied or worked in China for at least one year on a residence permit. Foreigners are allowed to only own one residential property for dwelling purposes.

It's also worth noting that while foreclosure rates are up year-over-year, experts do not expect to see a wave of foreclosures in 2023, even where home values are depreciating, as many homeowners have substantial equity due to progressive home price appreciation in recent years.

Based on Zillow's data and CAR's data, the California housing market is expected to experience a slowdown in 2023 and 2024. According to Zillow, the average home value in California is $728,121, down 3.4% over the past year, and homes go pending in around 15 days.

The housing market's crash during the Great Recession led the industry to pull back on construction for many years, and materials and labor shortages during the height of the pandemic fueled another slowdown.

As prices become unsustainable and interest rates rise, purchasers withdraw. Borrowers are discouraged from taking out loans when interest rates rise. On the other side, house construction will be affected as well; costs will rise, and the market supply of housing will shrink as a result.

While it's quite possible for median home prices to fall another 5% in 2024 – or a total potential drop of about 10% from the end of 2022 – if mortgage rates decline faster than predicted, that could mean home prices remain mostly flat through the end of 2024.

Sixteen million homes currently sit vacant across the U.S. In every state across the country, many homes remain empty while hundreds of thousands of Americans face homelessness.

According to Policy Brief No. 153 from the United Nations Department of Economic and Social Affairs (UN DESA), entitled “India overtakes China as the world's most populous country”, between 2023 and 2050, the number of persons aged 65 or over is expected to nearly double in China and to increase by more than double in ...

By the end of April, India's population is expected to reach 1.425 billion, which means it will match and then surpass mainland China's population, the U.N.'s Department of Economic and Social Affairs (DESA) said. “China's population reached its peak size of 1.426 billion in 2022 and has started to fall.

China's population decline can be traced back to the restrictive family-planning policies launched in the 1970s and an impressive economic boom fueled by China's huge labor force. China's modernization brought rapid urbanization, rising income levels, and better education to large parts of the country.

How China survived the global financial crisis? ›

China introduced the largest stimulus package in the world in late 2008, in the wake of the global financial crisis. China was also the first major economy in the world to emerge from the crisis. After a brief though sharp downturn in 2008, the Chinese economy recovered and grew by 8.7% in 2009 and by 10.4% in 2010.

China, like other major economies, used aggressive fiscal policy and loose monetary policy to fight the recession. But unlike those countries, the central government financed only about one-fourth of the stimulus. State-owned banks picked up the rest. Credit grew quickly as a result.

On average, there were 18.7 million fewer poor people in China since 1978 (World Bank Group, 2022:4). Thus, poverty eradication efforts in the decades since 1978 have been made possible by massive economic growth, and growing China's industry and economy was seen as the best way to end poverty.

There is still much work to be done to propel China to the top of the world's economy, but it is certainly possible that the Chinese economy can surpass the power of the US by 2050. It may also be too early to make definitive projections of China's future.

Overall, Chinese government debt is now equivalent to 102% of its GDP, the analysts estimated. That debt ratio is still lower than America's, which is currently about 122%, based on its national debt and GDP in 2022, but China's has grown at a staggering rate, more than doubling from 47% in 2016.

Economic growth hit 5.9% in 2021 - the fastest rate in nearly four decades - as pandemic reopenings fuelled consumer spending and job growth. Companies also had it good, enjoying unusually strong profits, despite facing higher costs for supplies.

Chinese GDP grew by just 3% in 2022, official figures revealed earlier this week, its second-slowest growth rate since 1976 and well below the government's target of around 5.5%. However, shorter-term data indicated a quicker-than-expected recovery as pandemic-era measures are wound down.

China National Government Debt reached 3,750.7 USD bn in Dec 2022, compared with 3,651.5 USD bn in the previous year. China National Government Debt data is updated yearly, available from Dec 2005 to Dec 2022. The data reached an all-time high of 3,750.7 USD bn in Dec 2022 and a record low of 404.1 USD bn in Dec 2005.

Still, China's economic headwinds could lead to major impacts. Any slowdown in the Chinese economy will create new price pressures in the U.S. if its export prices rise — and hurt the demand for U.S. products.

How have Chinese and Canadian investments developed over time? The share of Chinese investors in the U.S. real estate market remained somewhat constant until 2018 when it hovered at around 15 percent, before dropping to 11 percent in 2019 and then six percent in 2021.

How long can you own a house in China? ›

California is the epicenter of Chinese residential investment in the U.S., with 34% of purchases in the state. Other significant hubs are New York, New Jersey, Florida and Texas. In Irvine, population 280,000, “there are 65,000 houses... and 21,000 of them are owned by Chinese.” Lu of Fidelity National says.

BEIJING, June 1 (Reuters) - China's new home prices fell for the first time in four months in May and home sales slumped, according to a private survey, adding to pressure on a property market which is struggling to stabilize from a sharp slump.

"In the first half of 2023, the S&P 500 is expected to re-test the lows of 2022, but a pivot from the Federal Reserve could drive an asset recovery later in the year, pushing the S&P 500 to 4,200 by year-end," the investment bank said in a research note.

China's GDP should grow 5.7% per year through 2025 and then 4.7% annually until 2030, British consultancy Centre for Economics and Business Research (CEBR) forecasts. Its forecast says that China, now the world's second-largest economy, would overtake the No. 1-ranked U.S. economy by 2030.

10% Return for S&P 500 a Real Possibility by End of 2023

And in today's market, with its newfound emphasis on fundamentals, earnings really matter. Short of a recession — a very real possibility — consensus estimates are for about 5% earnings growth for S&P 500 companies in 2023.

Over the last year, China's housing market has become increasingly fragmented as home price trends have diverged across cities. While the national average home price has remained steady, many individual cities have experienced a persistent over-supply of housing that has caused a steady decline in local home prices.

China Evergrande Group, the developer at the epicenter of the country's real estate crisis, has yet to reach an agreement with major creditors on a debt restructuring framework crucial to avoiding potential court-ordered asset liquidation, people familiar with the matter said.

Domestic ratings company China Chengxin International Credit Rating estimates the hidden debt of local governments was in a range of 52 trillion yuan to 58 trillion yuan at the end of 2022, about 1.5 to 1.7 times the amount of explicit debt.

A huge proportion of personal assets are tied up in the property sector in China – as much as 70 percent of household wealth is in property.

How many unsold houses are there in China? ›

China had 3.5 billion square feet of finished but unsold apartments in February, according to Wind, a data provider. That is equivalent to around 4 million homes, according to some estimates.

Five Chinese companies listed on the New York Stock Exchange said they intend to delist their American depositary shares. The firms include China Life Insurance, PetroChina, China Petroleum & Chemical, Aluminum Corp. of China and Sinopec Shanghai Petrochemical.

Is the US on the road to a shrinking population like China? FREY: No, the US isn't dealing with a shrinking population like China. I think we're going to continue to have growth, but much slower growth. These last few years, the pandemic created very slow growth, almost flat growth.

At the end of 2021, of the 98 countries for whom data was available, Pakistan ($27.4 billion of external debt to China), Angola (22.0 billion), Ethiopia (7.4 billion), Kenya (7.4 billion) and Sri Lanka (7.2 billion) held the biggest debts to China.

Key Takeaways. China invests heavily in U.S. Treasury bonds to keep its export prices lower. China focuses on export-led growth to help generate jobs. To keep its export prices low, China must keep its currency—the renminbi (RMB)—low compared to the U.S. dollar.

China and Japan are the largest foreign investors in American government debt. Together they own $2 trillion — more than a quarter — of the $7.6 trillion in US Treasury securities held by foreign countries.