Odd Lots – "How Chinese Real Estate Became the Biggest Bubble in History"

Bloomberg | November 10, 2025
Hosts: Joe Weisenthal, Tracy Alloway
Guest: Mike Bird (Wall Street editor at The Economist; author of The Land Trap: A New History of the World’s Oldest Asset)

Episode Overview

This episode delves into the evolution, dynamics, and aftershocks of the Chinese real estate market — widely considered the largest speculative bubble in history. Hosts Joe Weisenthal and Tracy Alloway are joined by Mike Bird, who brings global, historical, and on-the-ground insights from his reporting and his new book. Together, they investigate how land and housing in China have transformed from communist dormitories to high-stakes investment vehicles, unravel the central role of local government finances, and consider how China’s path compares with other global models, especially Hong Kong, Singapore, and the US.

Key Discussion Points & Insights

1. Housing as Social Good vs. Investment Vehicle (01:53–02:48)

• The hosts debate the fundamental question: Is housing meant to be an affordable, social good — or is it an investment asset for wealth creation?

  • Joe Weisenthal: “I just want a very brief period of housing affordability... and then it stops being affordable.”
  • Tracy Alloway highlights that property has historically been “one of the few ladders to wealth for the masses.”

• The conversation situates this tension globally, noting that both the rich world and China confront similar affordability problems, deflating the idea that it’s merely about local policy idiosyncrasies.

2. China as the Ultimate Case Study (03:41–05:05)

• China epitomizes the duality of housing — as both a basic need and a speculative investment.

  • Despite efforts to control prices, moves that threaten property values provoke rare, notable protests.
  • Joe: “I thought they were communists... Where did communists get the idea of real estate?”

• Bird explains the historical shift: as the social safety net receded in the 1990s, Chinese citizens sought out property as a store of wealth for the future.

3. The Evolution of Land Policy (06:00–07:54)

• Mike Bird shares how his reporting in London and Hong Kong opened his eyes to the differing structures of land use/ownership — especially Hong Kong’s system of government-owned, leased land.

  • Hong Kong’s system is contrasted with mainland China’s, which inherited and adapted much of its land-financing model from Hong Kong following reforms initiated in the 1980s.

4. China’s Real Estate Boom: Genesis and Mechanisms (08:06–10:04)

• 1980s–1990s: With the economy transitioning from strict communism towards market-driven forces, housing reform became a catalyst for urban growth and government revenues.

  • Mike Bird recounts how Premier Zhao Zhiyang’s discussions with Hong Kong developers inspired adopting the lease-sale system in places like Shenzhen, starting in 1987.

• Local governments sold leases to raise funds, creating a symbiotic relationship between real estate development and urban fiscal needs.

  • “A big handover from Hong Kong... it’s a really good way of making money, especially if you own all the land.” (08:06)

5. Land Reform: Successes and Failures Globally (10:04–11:57)

• Bird discusses 20th-century land reforms: successful in Japan, Taiwan, Korea, but not replicable elsewhere (India, Vietnam).
  • Joe Weisenthal: “Most recurring theme on this podcast: [success happens] in three East Asian countries; no evidence it works anywhere else.” (11:36)

6. China’s Property Obsession, Financial Repression, and the ‘Great Ball of Money’ (11:58–13:54)

• Bird describes how cultural factors and lack of alternatives (equities, bonds, etc.) made real estate the rational place for household wealth.
  • Bank savings had negative real returns; the stock market performed poorly.
  • “China has the symptoms of both a housing shortage and a housing glut. It manages to get the worst of both worlds.” (13:39)

7. The Limits and Dangers of Speculation: The “Three Red Lines” Policy (16:26–23:49)

• Bird details how, as credit-fueled growth escalated, Chinese authorities attempted to rein in developer leverage by instituting the “three red lines” debt metrics around 2020–2021.
  • The moves were intended to cool off speculation, but instead precipitated sharp contractions, threatening household wealth and developer solvency.
  • “How do you get off the train while it’s moving?” (17:07)
  • Evergrande and others became tangled in unsustainable expansions and diversification (e.g. into EVs).
• The government’s moves attacked developers without addressing household incentives or local fiscal dependency on land.

8. Local Government Finance and the ‘Land Trap’ (23:49–26:52)

• The 1994 tax reform gave local governments massive spending obligations but clawed back revenue, leaving land sales as the main off-balance-sheet revenue stream.

  • “They see the land auctions, which are off-balance-sheet revenues... That’s how we’ll raise money.” (25:22)

• The hosts ask: “Has any country ever successfully gotten out of this situation without collapse or stagnation?” Bird answers, “Basically, no.”

  • The U.S. Great Recession (2008) is cited as one of the least bad outcomes.

9. China’s Economy: Can Manufacturing Replace Real Estate? (27:18–28:39)

• As real estate investment shrinks, authorities try to push excess capital and labor into manufacturing — but Bird argues that China is simply too big for manufacturing alone to absorb the slack:
  • “The domestic real estate market is absolutely gargantuan. The thing you’re trying to replace is enormous.” (28:00)

10. Real Estate’s Drag on Productivity & Misallocated Talent (28:46–30:27)

• Substantial research demonstrates how China’s boom siphoned entrepreneurial and financial resources from higher-productivity sectors into property.
  • “Every big Chinese company was trying to run a real estate company on the side during the 2010s.” (29:41)

11. Land, Reclamation, and the Hukou System (32:58–36:07)

• Real estate’s fixed (but sometimes expandable) supply is discussed, with Bird emphasizing that “creating” more land is about accessibility and urban integration, not just physical reclamation.
• The hukou system’s role in exacerbating speculative housing demand is explained: with welfare tied to one’s place of registration, internal migrants have few options but to buy property either at home or (rarely) where they move.
  • “It’s essentially like a savings technique more than it is [property use].” (35:09)

12. China’s Service Sector, Productivity, and the Future of Asset Allocation (38:01–39:49)

• China’s advanced manufacturing sector is world-class but does not represent the bulk of employment or productivity.
• Despite government efforts to spur equities or alternative investments, deep structural and political reforms are unlikely, limiting diversification of household wealth away from property.

13. Comparative Models: Singapore, Colonial America, and the “Land Trap” (41:57–44:31)

• Bird identifies Singapore as a rare global case where speculation was intentionally divorced from home ownership — through government ownership, tight restrictions, and an active Housing and Development Board.

  • “They’ve divorced usage from speculation... This asset class — land and real estate — is something different. We’re doing a different thing with this.” (43:56–43:59)

• Colonial America’s efforts to turn infinite land into money also discussed.

14. Policy Lessons, Social Contract, and the Prospect for Reform (45:09–48:43)

• China should develop a stronger social safety net to alleviate the compulsion to use real estate for retirement, but political resistance is strong at the top.
  • “There seems to be huge political opposition to doing this at the top of the Chinese Communist Party. And it’s bizarre.”
• U.S. and Western societies might consider property or land taxes to balance the gains from historical property “birth lotteries.”

Notable Quotes & Memorable Moments

• On China’s dual role for property:
  • “China is like the ultimate example of that tension between investment asset and social good.” — Tracy Alloway (04:28)
• On the rapid shift toward speculation:
  • “It’s been a completely rational thing for Chinese households... Extremely high-saving households buying property after property — a lot of them left vacant.” — Mike Bird (12:33)
• On government and local finance:
  • "They see the land auctions... That’s how we’ll raise money. And you see the proportion of income rise and rise and rise very aggressively through the late 1990s..." — Mike Bird (25:22)
• On the difficulty of policy reform:
  • “How do you get off the train while it’s moving?” — Mike Bird (17:07)
• On the Singaporean model:
  • “They’ve divorced usage from speculation. A place that most people think of as very capitalistic... has basically decided: this asset class, land and real estate—this is something different.” — Mike Bird (43:59)
• On stagnation and the lack of easy exits:
  • “I would say basically no [country has escaped without collapse or stagnation].” — Mike Bird (26:25)
• Joe’s summary of the core problem:
  • “I just think that for several of the last decades, people didn’t have to choose. You got to live in it and you made a lot of money.” — Joe Weisenthal (50:57)
• On the policy implications for the west:
  • “America has relatively high property taxes anyway. You can do all sorts of things with property taxes to lean more of the value on the land rather than the structures.” — Mike Bird (47:48)

Key Timestamps

• 01:53 Show proper begins; housing’s dual role introduced
• 06:00–08:06 Mike Bird recounts how living in London & Hong Kong shaped his perspective
• 08:06–10:04 The start of China’s land-lease model; inspiration from Hong Kong developers
• 10:04–11:57 Land reform in Asia: successes and failures
• 11:58–14:14 “Great ball of money” and the logic for real estate obsession
• 16:26–18:45 The “three red lines” and the problems with speculative finance
• 23:49–26:54 Local government finances and the dependence on land sales
• 27:18–28:39 Limits to manufacturing as an economic substitute
• 28:46–30:27 Real estate’s drag on Chinese productivity
• 32:58–36:07 Urban expansion, land accessibility, and the hukou system
• 41:57–44:31 Singapore’s unique model for separating ownership from speculation
• 45:09–48:43 Policy lessons: can social safety nets displace speculative demand?

Closing Thoughts & Tone

Throughout, the conversation is fast-paced, humorous, and candid, balancing deep policy analysis with skepticism about “easy answers.” The hosts and guest frequently lean into global analogies and historical perspective, underlining just how intractable — but also fascinating — the intersection of land, housing, and finance remains. The tone is conversational, sharp, and often wry, with both hosts and guest acknowledging the contradictions and cyclical nature of these “land traps” in history.

Suggested Next Steps for Listeners:

• Read Mike Bird’s The Land Trap: A New History of the World’s Oldest Asset
• Explore further Odd Lots episodes on China, property bubbles, and global land policy
• Reflect on how national policies and cultural norms shape the balance between housing as a home vs. investment