成败皆由它：中国经济为押注房地产付出代价
在违约之前，开发商恒大曾在中国的经济繁荣中占据核心地位。 
China Bet It All on Real Estate. Now Its Economy Is Paying the Price.
After relying on a borrow-to-build model for decades, Beijing must make difficult choices about the country’s housing market and economic future.
Before it defaulted, the developer China Evergrande was at the center of China’s economic boom.
When China’s housing boom seemed like a one-way bet, Gary Meng’s parents bought an apartment from China Evergrande, the country’s biggest developer. Soon the company called with another pitch: to manage their wealth.
It was a good deal with little risk, the family thought. Evergrande had global recognition and was a politically important company at the heart of China’s growing economy. They invested all their savings.
Then the unthinkable happened. In 2021, Evergrande defaulted, representing the start of a real estate meltdown that has shaken China’s economy, felled some of its biggest companies and left home buyers waiting on more than a million apartments. Last week, another embattled real estate company, Country Garden, said it had run out of cash, signaling that the worst may be yet to come. The companies have a combined $500 billion in debt and face critical hurdles in the coming weeks.
Beijing’s ability to slow the collapse is now in doubt as consumers continue to show a lack of interest in buying real estate, even during a recent Golden Week holiday, usually a bumper period for sales.
The housing crisis has presented an acute challenge for China’s political leadership: It is trying to wean the country off its decades-long dependence on real estate to drive economic growth, but doing so is deepening a crisis of confidence. Financial markets are questioning the future of China’s economic miracle, and households are abandoning their faith in the Chinese Communist Party’s promise of a better economic future.
“In the past, I believed in the government and the party and the country,” said Mr. Meng, whose family invested $300,000 in Evergrande’s wealth management arm and is still owed $194,000. Warned by the police not to file a complaint with higher levels of the government, Mr. Meng said that trust had been tested. “Now I can only say that I am quite bitterly disappointed,” he said.
Economists, investors and central banks around the world are warning of the risks to China’s financial stability, calling on Beijing to act to stabilize the housing crisis. The International Monetary Fund’s chief economist, Pierre-Olivier Gourinchas, said last week that China’s real estate crisis was undermining confidence and causing financial difficulties.
“The problem is serious,” he said at a summit of policymakers in Marrakesh, Morocco. Both the World Bank and the I.M.F. have cut their growth outlook for China’s economy.
The I.M.F.’s chief economist, Pierre-Olivier Gourinchas, center, said problems in China’s real estate market were damaging confidence.Credit...Fadel Senna/Agence France-PresseChina needs to recalibrate, according to economists, to be less dependent on investment in areas like infrastructure and real estate and more reliant on consumers.
“The challenge has been trying to give the sector enough support to cope with the transition without stimulating another property bubble or a rebound that makes these problems worse,” said Julian Evans-Pritchard, the China country head at Capital Economics, a research firm. “To get a turnaround in the economy,” Mr. Evans-Pritchard added, “you really need the property sector to stabilize.”
China’s Stalling Economy
- What to Know: China’s economy, which once seemed unstoppable, is plagued by a series of problems, and a growing lack of faith in the future.
- Real Estate Crisis: Country Garden and Evergrande, two of China’s largest developers, are at the center of the spiraling property crisis that has shaken the country’s economy.
- A Worrying Sign: Prices are falling again in China after a two-month reprieve, renewing fears that the country is on the cusp of a pernicious economic condition called deflation.
- Beijing’s New Plan: China’s political leaders, under pressure to support the country’s fragile recovery, are slowly steering the economy on a new course that calls for investing heavily in manufacturing.
Chinese officials have tried to put a floor under falling real estate sales in recent weeks but so far to little effect. Country Garden failed to make a payment on nearly $200 billion of debt on Tuesday and still has more than 400,000 apartments that it sold but has not finished building.
How the real estate market came to be at the center of China’s economy was long in the making. For years, everyone bet on housing. Local governments lined their coffers with the proceeds from selling land. Families invested in apartments. Jobs for builders, painters, landscapers and real estate agents were in abundance.
Evergrande’s model was copied by other developers and real estate became the single-biggest contribution to China’s breakneck growth. In 2020, the central government turned its focus to the debt that had piled up and restricted the ability of real estate companies to borrow from banks. The policy, known as the “three red lines,” put a limit on how much debt developers could have and left companies like Evergrande scrambling for cash and turning to more risky ways to avoid a cash crunch.
Evergrande ramped up an industry practice of raising money by selling apartments before they were built. It also turned to employees, telling them to invest in short-term loans or lose out on bonuses. And it persuaded people who had already bought Evergrande apartments to buy investment products offering huge returns. Mr. Meng and his parents were promised 8 and 9 percent interest on their investments. They made money on two of them in 2021, but by the next year, interest payments had stopped altogether.
The intensive borrowing in China fed excesses in other sectors: Insurers bought hotels, and an entertainment company bought a Hollywood studio. All the economic activity made it easy for the government to ignore the bubble that was building because companies, including Evergrande, were helping local governments — first by buying land and then by building complexes that contributed to economic growth that got local politicians promoted.
The locked entrance to an Evergrande residential project in 2021.Credit...Gilles Sabrié for The New York Times
Now that most of these companies are in the graveyard of corporate excess, many are wondering what Beijing will do next.
Consensus has emerged among experts in China that it will not return to those days of excess. But questions remain, especially as the broader economic outlook darkens.
“When you have 30 years of rising prices, there is no way you can stop that process without tremendous pain in every part of the economy,” said Michael Pettis, a senior fellow at Carnegie Endowment for International Peace.
Everyone who benefited from the real estate boom — the banks, local governments and households — has a lot at stake. “The political question is, who takes the loss,” Mr. Pettis said.
Until now, the government had made clear that home buyers would not be the casualties of the reckoning in the real estate market. Despite having defaulted, Evergrande was allowed by officials to continue building 300,000 apartments last year.
Evergrande’s importance for policymakers now appears to be over. This month, the authorities detained its founder, Mr. Xu, on suspicion of what the company called “illegal crimes.” Several other top executives and employees of its wealth management arm have been taken in for questioning.
Ensuring that apartments promised by now-broke developers get built will cost $55 billion to $82 billion, according to estimates from economists at the Japanese financial firm Nomura.
But these same developers owe many other people money. Suppliers, like painters, builders and brokers, are waiting on more than $390 billion, by one estimate. Foreign creditors who lent billions to Chinese developers are banding together to try to get some of their money back through complicated restructuring plans.
And China’s leaders will need to spend much more money to bolster private businesses and households to encourage them to spend and get the economy moving, said Bert Hofman, an honorary senior fellow on the Chinese economy at the Asia Society Policy Institute. This will mean transferring more money into things like rural pensions and increasing health care coverage.
“More broadly, reforms need to be put in place to manage the demand side of the economy without using real estate as a lever,” Mr. Hofman said.
“Just words is no longer enough,” he said. “It is about policy actions and visible events that would give people confidence to say yes, there is something to this.”
Claire Fu contributed reporting from Seoul, and Patricia Cohen from Marrakesh, Morocco.
Alexandra Stevenson is the Shanghai bureau chief for The Times. More about Alexandra Stevenson
