China real estate crisis: China’s real estate crisis, driven by halved property prices and 81 million vacant homes, worsens amid stricter debt regulations and a shrinking population. Weak consumption, deflation, and export challenges compound the economic strain. Experts stress urgent reforms to prevent prolonged stagnation.
Real Estate Market in Crisis
China’s once-booming real estate market, a key driver of its economy, is now under severe strain. Stricter regulations on developer debt led to a sudden crash in 2021. As a result, property prices halved, and approximately 81 million homes currently stand vacant.
Adding to the crisis is a shrinking population. After peaking at 1.43 billion people in 2020, China’s population has declined by 10 million. Forecasts suggest the number could plummet to 767 million by 2100, further weakening housing demand and economic growth.
Weak Consumption and Deflation Hurt Growth
The combination of a declining population and economic uncertainty has severely dampened domestic consumption. Consumer prices have fallen for six consecutive quarters, solidifying deflationary pressures.
Despite efforts by the government, including stimulus packages and looser monetary policies, economic recovery has been limited. Experts like Marcus Weyerer from Franklin Templeton identify low consumer confidence as a critical issue. Without substantial reforms, China risks entering a prolonged period of stagnation similar to Japan in the 1990s.
Exports as an Uncertain Lifeline
With a weakened domestic market, China is increasingly relying on exports to support its economy. However, international barriers are growing. Europe has introduced tariffs on Chinese goods, and the United States has long maintained trade restrictions. Former President Donald Trump has even proposed further tariff hikes, potentially making the U.S. market less accessible.
This struggle is evident in the automotive sector. In 2024, China produced 28 million vehicles, despite having the capacity for 60 million. Domestic demand remains insufficient to absorb this surplus, and expanding into new export markets has proven challenging.
Reforms as the Key to Recovery
China’s future economic stability depends heavily on implementing substantial reforms. Experts like Wang Wen from Renmin University see urbanization as a potential driver of growth. If the urban population increases from 65% to 80%, it could provide a significant boost to the economy.
Nevertheless, the gap between China and the U.S. remains substantial. Without deep structural changes, China risks a prolonged period of stagnation. However, with strategic planning and targeted reforms, the country could regain its footing and chart a path toward sustainable growth.
China real estate crisis