The housing market is experiencing its largest downturn, triggered by government action in 2020 to limit financial risks from the property sector by introducing debt ceilings for developers. The market is far from reaching a new equilibrium because the government's priority is to ensure the completion of housing that citizens have already paid for.
A sudden far sharper crisis remains unlikely; the downturn will be managed with policy support, loan rollovers and steadily lower prices.
It is uncertain if China’s courts will let offshore lenders take Evergrande’s assets, as liquidation would stop pre-sold housing completion.
The downturn will continue to dampen activity in sectors upstream of the housing sector such as construction, steel and cement.
Domestic investors may look for alternative investments, creating chances in the stock market and private pensions and insurance market.
