Why China’s property bubble burst

Summary

Podcast Summary: Why China’s Property Bubble Burst

Business Daily — BBC World Service
Host: Matt Lynes
Guests: Alexandra Stevenson (NYT), Desmond Shum (Property Tycoon), Henry Wang (Centre for China Globalization), Alicia Garcia Herrero (Natixis)
Date: 21 September 2025

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Episode Overview

This episode investigates the roots and repercussions of China’s property market crisis—once a symbol of unstoppable growth, now a cautionary tale of overbuilding and financial stress. Host Matt Lynes and a panel of industry insiders and analysts break down how the market unravelled, the human stories behind the statistics, the unique way it's playing out compared to Western property busts, and the global ramifications of China’s shift away from real estate.

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Key Discussion Points & Insights

1. Origins and Scale of the Bubble

• Historic Boom:
  • China’s property sector experienced decades of rapid, seemingly unstoppable growth, peaking at 30% of national GDP.
  • Real estate was, for years, the default (and sometimes only practical) investment for ordinary Chinese due to restrictions on moving money abroad and limited stock market options.
  • “We have built enough housing for 3 billion people... China, you know, as we know, has 1.4 billion. So we are way overbuilt and just have too much inventory.” — Desmond Shum [01:46 / 06:43]

2. The Turn from Boom to Bust

• Crucial Turning Points:
  • 2020: Government crackdown on speculative property investment, introduction of funding restrictions to developers.
  • August 2021: Evergrande issues profit warning; defaults by December 2021, triggering panic and a cascade of developer collapses.
  • “For a long time, it seemed as though there was only one direction that property prices could go, and that was up.” — Alexandra Stevenson [03:33]
  • “Everybody starts thinking, oh, my God, this is China’s Lehman moment.” — Alexandra Stevenson [04:16]
  • Even “safer” developers like Country Garden later got into severe trouble [04:56].

3. The Human Cost

• Mortgage Boycotts & Ghost Apartments:
  • Massive numbers of unfinished and unsellable apartments; buyers unable to move in or see their life savings evaporate.
  • “We used up all our savings to buy our apartments. It’s been five years and we can’t live in them. We can’t bear it any longer. We're out of options.” — Anonymous resident (via BBC reporting) [05:20]
  • “I feel really helpless. We don't want to live like this. But we've got nowhere to go.” — Resident, paraphrased by Desmond Shum [06:08]

4. Why the Chinese Bust Is Different

• Managed Decline:
  • Unlike the rapid collapses of US or UK real estate bubbles, Chinese authorities tightly manage the process.
  • Bad developers don’t go bankrupt immediately; the timing is politically managed, and creditors can’t easily seize assets.
  • “You will not see a collapse of the Chinese economy or collapse of industry... What you see is just a long slide downward of the Chinese economy.” — Desmond Shum [09:35]

5. Government Response and Optimism

• Official View — "Adjustment Period":
  • The downturn described as an expected phase in China’s transition—from high-speed growth to “high quality” growth, with more focus on technology and green sectors.
  • “China has always had a big absorbing power... the government central financing is so effective in coordinating... So I’m sure they're going to get that over.” — Henry Wang [14:10]
  • Authorities intervening to protect individual homebuyers and keep the fallout contained [14:10].

6. Broader and Global Consequences

• Ripple Effects:
  • Hit to local governments and industries tied to construction.
  • Saving loses for millions, impacting consumption and confidence.
• Global Impacts:
  • Capital controls prevent Chinese investors from exporting the real estate bust.
  • Instead, China’s companies shift focus to manufacturing (EVs, batteries) and foreign investments, especially in Europe.
  • “China will do its utmost more than ever to conquer markets... The presence of China will not be reduced because of real estate sector crisis. The other way around, it will be larger than ever in the manufacturing sector.” — Alicia Garcia Herrero [17:36]

7. No End in Sight

• Continuing Crisis:
  • New data: Prices down in every top-100 Chinese city; “nowhere close to bottom.”
  • Yet another major developer, Vanke, looks unstable, indicating the crisis is far from over.
  • “All signs point to more trouble ahead.” — Alexandra Stevenson [19:02]

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Notable Quotes & Memorable Moments

• “We have built enough housing for 3 billion people... We are way overbuilt and just have too much inventory.”
  — Desmond Shum [01:46 / 06:43]

• “For a long time, it seemed as though there was only one direction that property prices could go, and that was up.”
  — Alexandra Stevenson [03:33]

• “Everybody starts thinking, oh my God, this is China’s Lehman moment.”
  — Alexandra Stevenson [04:16]

• “We used up all our savings to buy our apartments. It’s been five years and we can’t live in them... It's hard to make money. But there are still house and car repayments.”
  — Reported by Stephen McDonnell, BBC [05:20]

• “I feel really helpless. We don’t want to live like this.”
  — Resident (paraphrased/translated) [06:08]

• “You will not see a collapse of the Chinese economy or collapse of industry... What you will see is just a long slide downward.”
  — Desmond Shum [09:35]

• “The government has a lot... of tools in the toolbox... things can be worked out as time goes on.”
  — Henry Wang [14:10]

• “China will do its utmost more than ever to conquer markets... The presence of China will not be reduced because of real estate sector crisis. The other way around, it will be larger than ever in the manufacturing sector.”
  — Alicia Garcia Herrero [17:36]

• “All signs point to more trouble ahead.”
  — Alexandra Stevenson [19:02]

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Structure & Timestamps for Important Segments

| Timestamp | Segment / Speaker | Topic | |-------------|----------------------------------------|--------------------------------------------------------------------------------| | 01:10-03:11 | Alexandra Stevenson | How the boom unraveled, regulatory impacts | | 03:33-05:20 | Alexandra Stevenson | Evergrande, Country Garden, the shock to the market | | 05:20-06:11 | Residents (via BBC) | Human impact: Mortgage boycotts, unfinished homes | | 06:43-09:21 | Desmond Shum | Overbuilding, ongoing price declines | | 09:35-10:56 | Desmond Shum | Why China's bust is so gradual and government-managed | | 12:56-15:33 | Henry Wang | Official view: cyclical adjustment, government response | | 15:58-18:50 | Alicia Garcia Herrero | Global impacts, shift to manufacturing, China's presence abroad | | 19:02-20:02 | Alexandra Stevenson | No sign of recovery, signs of further trouble ahead |

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Summary

This episode delivers a comprehensive examination of China’s property crisis, blending data, policy analysis, and direct voices of those affected. The collapse has broad consequences: vast overbuilding, shaken public faith in the real estate investment model, and an accelerated shift in China’s economic priorities. While the government manages the pace and visibility of decline to prevent chaos, the core issues—oversupply and lost trust—are unresolved and spreading to other developers. Internationally, rather than leading to asset sell-offs, China is doubling down on manufacturing and global market expansion. The overall tone is sober, but guests from Beijing underscore the government’s ability (and historical record) to weather major shocks, even as the social and economic pain continues beneath the surface.

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Transcript

[Matt Lynes]

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[Matt Lynes]

Hello and welcome to Business Daily from the BBC World Service with me, Matt Lyons. Today we're looking into the property crisis hitting the world's second biggest economy, China.

[Alexandra Stevenson]

The crisis in China's real estate sector continues to grow.

[Matt Lynes]

We remember Chinese property developer Evergrande collapsed a couple of years ago. But now another company also about to go under, Country Garden. In the early 2000s, the country had one of the biggest real estate booms seen anywhere in the world. But in 2020, that very quickly started to unravel when some of the country's largest companies started collapsing and the boom turned to bust.

[Desmond Shum]

We have built enough housing for 3 billion people to live in and China, you know, as we know, has 1.4 billion. So we are way overbuilt and just have too much inventory.

[Matt Lynes]

For many in China who invested their money in property, the impact has been devastating.

[Alexandra Stevenson]

You see cranes on top of all the buildings, they're all stalled. And I asked somebody, why don't they take them down? And the person said to me, well, because if you take the cranes down, that signals something entirely different.

[Matt Lynes]

And it's not just those within the country who are worried.

[Alicia Garcia Herrero]

The most important impact on the world is that China is looking elsewhere where manufacturing, high end production, investing to sell to the rest of the world.

[Matt Lynes]

China's property crisis, that's coming up on today's Business Daily.

[SAP Concur Representative]

The world's most indebted property developer, Evergrande, has been given a winding up order by A court in Hong Kong, Country.

[Desmond Shum]

Garden, appears to have dodged default again. Country Garden had failed to make the scheduled payments early last month.

[Alexandra Stevenson]

Let's talk a little bit more about Evergrande. Liquidators are preparing to focus now on the company's founder, Hui Cayenne.

[Matt Lynes]

The last few years have seen headlines like these coming out of China regularly. News of some of the country's biggest property companies defaulting, putting out profit warnings, and delisting from the Hong Kong Stock Exchange. So how did we get here?

[Alexandra Stevenson]

The property market, first of all, was such an important part of the economy. You know, it count. It accounted for 30% of GDP at the peak. It was also the one place where everybody put their money. Everybody believed in the property market boom. Nobody thought that there could be a bust.

[Matt Lynes]

That's Alexandra Stevenson, Shanghai bureau chief for the New York Times.

[Alexandra Stevenson]

So China's property market rose and rose and rose for decades. And for a long time, it seemed as though there was only one direction that property prices could go, and that was up. And then when Xi Jinping came into power. So six, seven years into his presidency, he started talking about this idea that homes were not for speculating, they were for living in. He put that idea into practice, really, in 2020, when regulators stepped in, essentially stopped a lot of the funding, the free loans that were going to property developers who were really fueling the boom. And then In August of 2021, Evergrande, which was one of the biggest property developers in China, issues this profit warning. Pretty soon after that, it was almost on a weekly basis that they were starting to notify the market of more problems. You know, everybody starts thinking, oh, my God, this is China's Lehman moment. And then In December of 2021, Evergrande defaults. It just can no longer make its debt payments. And it triggers this broader panic in the property market because Evergrande was thought of as one of these companies that was too big to fail. Nobody really thought that Beijing, that the central government would let Evergrande collapse. And then they did. Country Garden was another giant in the property market. And for years after Evergrande's collapse, everybody thought, well, Country Garden is the good kid, right? It was better with its financing. And then in 2023, Country Garden had its own problems. And so another moment in the property sort of bust where there was another realization that we hadn't reached the bottom and that there was more to come.

[Matt Lynes]

In 2022, the BBC's China correspondent, Stephen McDonnell, met some of those who'd stopped paying their mortgages on their Unfinished apartments. He asked one of them how many people were living in the building he visited. One or 200. We used up all our savings to buy our apartments. It's been five years and we can't live in them. We can't bear it any longer. We're out of options. It's hard to make money. But there are still house and car repayments.

[Desmond Shum]

So we have a six year old and an eight year old sleeping here. And this is some clothes hanging up.

[Matt Lynes]

Speaking to another resident, he asked how they felt living here.

[Desmond Shum]

I feel really helpless. We don't want to live like this.

[Matt Lynes]

But we've got nowhere to go. At its height in 2017, Evergrande was worth $50 billion. And now eight years later, has been removed from the Hong Kong Stock Exchange and put into liquidation. It had been valued at just over $260 million with shares worth $0.02 when a trading freeze was imposed on the country in January of last year. Desmond Shum is a Chinese property tycoon and multimillionaire who's been in the industry for decades and once moved in the highest echelons of power in Beijing.

[Desmond Shum]

August 2025, the Market Survey or industry survey of the real estate market just came out and it's a Survey of top 100 cities Real estate market in China and every city the price has dropped in every city of the 100, not a single exception. So that sort of give you a snapshot of where the market is. The market essentially started correcting after Covid. I mean Covid is a shock to the system and it's sort of wake up call to the industry. One of the vice retired vice minister, part of land development, Rich oversees the real estate industry and he made a statement two years ago and he said we have built enough housing for 3 billion people to live in and China as we know has 1.4 billion. So we are way overbuilt and just have too much inventory. And that level of excess inventory is unseen anywhere in any country. And that's why the market, you know, although the market has again basically went on a four year uninterrupted decline, it is, you know, in my view it's very early stage. We are nowhere, nowhere close to bottom.

[Matt Lynes]

And what is the chief cause of.

[Desmond Shum]

This, what actually happened was essentially until the COVID the Chinese real estate market essentially went on almost uninterrupted 20 year run. That means the price constantly goes up and go up by large percentage year on year for almost 20 years. The reason is essentially the Chinese has capital control so they cannot invest outside of China. Within China, the stock market is so volatile and the real estate market went on 20 year uninterrupted run. So everybody in China essentially used the real estate market as an industrial vehicle and investment vehicle as an investment vehicle. And that created a huge bubble. And what happened is the bubble has got to a point of unsustainable every part.

[Matt Lynes]

So why has this bubble played out differently seemingly to other bubbles, say in the US and other countries around the world where you see companies collapse? Why is it playing out over such a long period of time?

[Desmond Shum]

The government have tremendous control on every aspect of the society and the economy. What does that mean? That means the insolvent developers in any other country, those companies will have bankrupt and buried up years ago. The debt owners or the creditor of the bank will have go after the assets of the company and try to incorporate their investment. But in China, you're not allowed to do it. So they only will belly up at the timing of government's choosing and your creditors can't even go up to the assets of the companies. So you will not see a collapse of the Chinese economy or collapse of industry. What you will see is just a down skip, a very, very managed down skip because the government can work its magic, sort of bring the industry back to alignment, but they do have the capability to sort of manage the pace and a duration of the down skip. So what you see is just a long slide downward of the Chinese economy. I think that's what's going to happen and I think that is what is happening.

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Then full price plan options available. Taxes and fees extra. See mint mobile.com you're listening to Business Daily from the BBC World Service. I'm Matt Lines Looking into the crisis that's hitting China's property sector. We've heard a lot about how the Chinese government has managed this crisis. Let's get the perspective from Beijing. Henry Wang is the founder of the Centre for China Globalization and also a former councillor to China's State Council.

[Henry Wang]

Well, I think you know for all the economy basically there's always cycles. I mean China is probably no exception and you can see that the real estate boom in China has been lasted for since 1990s, almost 30 some years now and has been very instrumental in transforming China. But now as time goes on I think Chinese economy has grown more mature now and certainly slows down from high speed to high quality. And then real estate play a bit less role and because also saturated a little bit. But on the other hand the Chinese economy also rapidly developing other areas such as digital economy transition, green power sectors also AI. So I'm thinking you know this is an adjustment period. Chinese economy still is keeping 5% GDP growth and I'm sure that is the target that the Chinese government continues to aim for.

[Matt Lynes]

Sounds like you've got quite a positive outlook there. But at one point the property sector accounted for 30% of China's economy. Evergrande country guards and there are others that have got into this trouble collapsing it must have had an impact on the Chinese economy more widely.

[Henry Wang]

Well it certainly has some impact certainly and I think the government has taken a lot of measures. For example, just for example the Evergreen I know friends who bought the apartment. The the government actually would make sure the buyers of the citizens of the residents they will be getting the property they bought. I think there's probably some institutional financing, probably has some problem but that is going to be digested. I think you know China has always has a big absorbing power of all those. You know if there's any regional or if there's any sectoral difficulties you know, because the country is so big, the government central financing is so effective in coordinating rich regions can help those less developed regions. So I'm sure they're going to get that over. And as a matter of fact, you don't hear too much about complaints about real estate. It certainly stabilized or maybe falling quite a bit lately. But as I said, the other sectors are ongoing, the other areas are developing. So the government has a lot of still have some tool in the toolbox to fix the issue and also the consumption of other things like automobiles, like other big ticket items still going on. And so I'm sure, you know, things can be worked out as time goes on.

[Matt Lynes]

The crisis has hit a number of sectors across China, with the real estate industry a big major source of revenue for local governments. There's also been hits to the construction industry, a huge employer. And for ordinary people who put their savings into property, the that's not worth anywhere near what they paid for it. The effects won't just be felt within China. Alicia Garcia Herrero is chief economist for the Asia Pacific region at financial services firm Natixis.

[Alicia Garcia Herrero]

So if we focus on the real estate sector, one could argue, okay, if they very much like this sector, and we know that Chinese do like to invest in real estate, they should go overseas and buy. Given that the prospects for China's real estate sector are very poor, the reality is that it is very hard to use your money in China to bring outside of China, buy apartments elsewhere. It's increasingly hard because of capital controls. So the other option they have is to buy something else, which is what companies are doing, or at least invest in something else, for example, setting up companies, whether it's to produce electric vehicles or batteries. So that kind of investment is indeed flowing out of China, but not to buy real estate units elsewhere because it's just very hard to do that. So overall, I would argue that the impact on the world, the most important impact on the world is that China is looking elsewhere where manufacturing, high end production, investing to sell to the rest of the world, to sell electric vehicles, to sell batteries, and that is making China a much stronger manufacturing power because in a way they need to force themselves to forget the real estate sector. So in a way the risk comes from the fact that they need to move away from this sector rather than invest in this sector elsewhere.

[Matt Lynes]

What does it mean for people around the world in terms of what they'll see from the Chinese economy and how it might affect them? I guess, and perhaps in terms of investments and that kind of thing?

[Alicia Garcia Herrero]

Yeah, so great question. What it means for all of us outside of China is that China will do its utmost more than ever to conquer markets, whether it's through exports to US, consuming Chinese goods more than ever and or investing in the west wherever it is feasible. The US of course you mentioned very hard because Chinese companies are not allowed to invest in the US it's very difficult. But certainly the uk, Europe, so that they can avoid protectionism. So okay, if they can't sell everything they want to to us, they may as well produce in Europe and therefore avoid tariffs, incoming tariffs. And this is what China will be doing. So what this means to all of us is that we will see many more of these companies operate in Europe or we will see many more of Chinese products in our supermarkets, you name it, or, you know, cars. So the presence of China will not be reduced because of real estate sector crisis. The other way around, it will be larger than ever in the manufacturing sector.

[Matt Lynes]

So what's still to come in this crisis? Country Garden is facing a winding up petition in the Hong Kong court in January of next year. Evergrande is in the process of being dismantled. Let's hear from Alexandra Stevenson from the New York Times.

[Alexandra Stevenson]

Again, Country Garden isn't the end. There is another property developer, if you can believe it. We're now dozens and dozens of developers have died in China and Country Garden was the latest big one to default. But there's another developer called Vanke, which is sort of now everybody is watching and things are not getting any better for Vanke. And that is yet another sign that we haven't found the floor to this property bust. You know, it keeps rolling on and the big question is whether it will be another Country Garden and another Evergrande. There's no clear recovery in this property bust and the latest data that we've seen show that new home prices are dropping. The number of vacant homes that are available for sale. It's at a record. So all signs point to more trouble ahead.

[Matt Lynes]

And that's it from today's edition of Business Daily. It was produced and presented by me, Matt Lynes. And remember, you can listen to more episodes of Business Daily wherever you get your podcasts. Thanks to all my guests and thanks to you for listening.

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