China’s property sector continues to weigh on the economy despite the life imprisonment of Hui Ka Yan, the founder of China Evergrande, who was once among the country’s wealthiest businessmen. The housing downturn, now in its sixth year, has left millions of partially built homes, weakened household wealth and reduced activity in property sales, construction and land markets. 
The sector’s problems have also become a wider economic concern. The recovery in new-home prices in major cities such as Beijing and Shanghai has stalled, while land sales continue to decline and falls in property sales and construction have accelerated. In smaller inland cities, second-hand home prices have dropped by almost a quarter from 2020 levels, putting further pressure on household consumption. 
China’s economy grew 4.3% in the three months through June from a year earlier, marking its slowest growth in more than three years. With property no longer providing the same support to domestic demand, exports have become increasingly important to economic growth. 
China’s trade surplus has more than doubled since 2019, contributing to rising trade tensions with the European Union and the United States. This has also raised concerns over a possible “China Shock 2.0”, as Chinese exports increasingly compete with local industries in trading partners, including developing economies in the Global South. 
Hui’s sentencing has brought renewed attention to the scale of the property crisis. Many homeowners and creditors questioned on Chinese social media why he was not given the death penalty after being convicted of offences including misuse of funds and bribery. Posts on Weibo, China’s equivalent of X, generated more than 370 million views and 72,000 discussions around the sentencing. 
Analysts said there is no simple solution because the problem is closely linked to excess housing supply and weak demand. Sam Radwan, chief executive of real estate consultancy Enhance International, said China has more homes than households, with second homes having been used as investments by more than a third of the population. 
Evergrande defaulted in 2021 and entered liquidation in 2024. Country Garden, another major developer, defaulted in 2023 and has not purchased land since then. China Vanke is seeking extensions on some bond repayments and has replaced most of its senior management with executives from state-owned enterprises. 
President Xi Jinping has been directing bank credit and government support away from property towards strategic manufacturing and technology sectors, including robotics and semiconductors. Analysts, however, said these industries are still too small to compensate for the continued weakness in housing. 
The downturn has also changed the structure of China's property market. With most private developers having defaulted, state-owned developers now dominate the sector, while market participants expect greater government oversight. A loan officer at a major state-owned bank said lending to private developers had largely stopped for a long period and that banks now primarily consider whether a developer is backed by the central or local government. 
Views differ on how much further the housing market could fall. Radwan estimates that it could take around 18 months to clear existing housing inventory and believes home prices may need to decline another 40% from 2025 levels before the market reaches equilibrium. He expects the adjustment could take another decade. 
Other analysts are less pessimistic. Christopher Beddor, deputy China research director at Gavekal Dragonomics, expects the market to continue correcting but does not see a substantial deterioration from current levels. He said a gradual decline in prices could eventually clear excess inventory and create conditions for improvement. 
For homeowners, however, the adjustment remains severe. Jason Wang, a 38-year-old homeowner in Shandong, said the value of his home had fallen 25% since he bought it in 2019. Shandong has been among the provinces most affected by the housing downturn. He said the financial pressure had become difficult for households, questioning how people could afford to purchase homes when many were struggling with basic living expenses. 
Source Reuters