Chinese authorities have rejected a proposal made by the International Monetary Fund to use central government funds to complete unfinished housing, dealing a blow to hopes for more forceful support to an industry that’s been a major drag on the economy.
The quick answer is because the housing market was used for speculation and was causing real estate prices and rents to rise. China introduced “three red lines” policy to mitigate this and let the housing market crash and let the billionaire CEO Hui Ka Yan (and mostly foreign Investors) hold the bag
There were other positive feedback items happening as well, including local governments relying on development as the major tax base.
China is also likely to see a drop in infrastructure investment in the next generation, so having some of these companies collapse isn’t seen as a major issue in China.
On a more practical and immediate level, it crashed because of COVID. Chinese real estate companies were using new money to finish old projects, and when supply shocks and work stoppages interrupted the system, it fucked the whole thing. The government has been reacting to that crash ever since.
Why did it crash like this though? Its really hard to find truthful information about this housing thing.
Because housing is for living in, not for speculation or asset price inflation.
The quick answer is because the housing market was used for speculation and was causing real estate prices and rents to rise. China introduced “three red lines” policy to mitigate this and let the housing market crash and let the billionaire CEO Hui Ka Yan (and mostly foreign Investors) hold the bag
There were other positive feedback items happening as well, including local governments relying on development as the major tax base.
China is also likely to see a drop in infrastructure investment in the next generation, so having some of these companies collapse isn’t seen as a major issue in China.
On a more practical and immediate level, it crashed because of COVID. Chinese real estate companies were using new money to finish old projects, and when supply shocks and work stoppages interrupted the system, it fucked the whole thing. The government has been reacting to that crash ever since.