Is China’s Real Estate Debt A Gigantic Ponzi Scheme?

Real-Life Impact Of China’s Real Estate Ponzi: “Evergrande, give my money back!” New York Times, Jan. 4, 2022

IN THE NEWS:

Impact of China’s Regulation of Real Estate Debt

Last month, contracted sales for top property developers in China fell by 31% from a year earlier. See WSJ. Also last month, the China Evergrande Group, one of China’s largest real estate developers, defaulted on its loan. According to the Wall Street Journal, it was potentially “Asia’s largest default”. Notably, the New York Times identifies Evergrande as “the world’s most indebted developer”.

The continued health of the real estate industry is a big deal for China, even a bigger deal than it is for the U.S., because real estate activity accounts for about a quarter of China’s GDP, compared to about 15% of our GDP here in the U.S. See WSJ.