China Faces Economic Transition as Real Estate Crisis Tests Housing Market Dependence

After relying on a borrow-to-build model for decades, China faces challenges stabilizing its housing market and shifting its economic dependence on real estate.

The housing crisis has undermined confidence in China's economy and tested public trust, as major developers like Evergrande default leaving homebuyers waiting.

Economists warn China must recalibrate its economy to rely less on real estate investment and more on consumers, but stabilizing housing without stimulating a new bubble is difficult.

The intensified borrowing in China’s real estate boom fed excesses in other sectors, but the bubble was ignored as it fueled growth that benefited local governments.

Shifting China’s economy away from real estate dependence will require spending to support businesses and households, as well as broader reforms to manage demand without real estate as a lever.