China’s property reset comes with a heavy price
Ka Sing Chan
Ka Sing Chan
March 10, 20265:00 AM GMT+7Updated March 10, 2026
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Chinese President Xi Jinping applauds at the opening session of the National People’s Congress (NPC) at the Great Hall of the People in Beijing, China March 5, 2026. REUTERS/Florence Lo/Pool/File Photo Purchase Licensing Rights, opens new tab
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HONG KONG, March 10 (Reuters Breakingviews) – There is no doubt that China’s real-estate bubble needed popping. Beijing has spent nearly a decade letting air out of the country’s historically speculative property market, which at times powered a quarter of the world’s second-largest economy. However, the structural distortions that fed the bubble still exist, while the cleanup is exerting a lasting drag on growth.
For years, real estate soaked up Chinese savings, drove urbanisation and bankrolled local governments, who partly relied on land sales for income. Easy credit, perceived implicit state backing and a lack of attractive investment alternatives all pushed households and developers to bet on ever-rising prices. So entrenched was the mania that few people took Xi Jinping seriously in 2016 when the Chinese president declared that houses are for living in, not for speculation.
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The real estate market only started buckling in 2020 when Beijing unleashed its “three red lines” policy, which limited developers’ debt-fuelled growth by testing their borrowings against assets, equity and cash. By that point, the problem was acute. Floor space under construction amounted to over five times annual sales, implying a giant backlog of developments that would take years to shift, if they could even be sold at all.
