Explainer | Will China’s property headaches have broader economic effects?

Growth prospects hampered by weakened confidence, debt burdens as property market continues slouch

Recent policy shifts have helped, but full-scale turnaround unlikely as decision makers are still charting long-term course

Reading Time:3 minutes

A worker walks past a housing complex under construction by Chinese property developer Evergrande in Wuhan, China’s central Hubei province, on September 28, 2023. Persistent weakness in the property sector is driving concerns about the country’s growth prospects. Photo: AFP

Published: 9:00am, 5 Oct 2023Updated: 4:03pm, 19 Oct 2023

China’s property crisis is expected to continue to slow its growth. The World Bank said on Sunday it had cut its 2024 gross domestic product (GDP) growth estimates for the world’s second-largest economy to 4.4 per cent, down from its previous 4.8 per cent.

The bank cited elevated debt and weakness in the property sector as key drivers for this change, as well as longer-term structural factors.

How has the property downturn affected the economy?

China’s GDP growth has been largely driven by investment in infrastructure and property, although years of rapid growth has left these sectors saddled with mountains of debt.

China’s aggregate domestic non-financial debt-to-GDP ratio has more than doubled according to the World Bank, from 132 per cent in 2007 to 285 per cent in 2023.

Following intense efforts from Chinese regulators to deleverage and reform the real estate sector, private developers began to default on their debt in the middle of 2021, leading to many unfinished homes and suppliers and creditors with unpaid accounts.

Select Voice

Choose your listening speed

Get through articles 2x faster

1.25x

250 WPM

Slow

Average

Fast

00:0000:00

1.25x