Evergrande: China’s epic property bubble hisses air
Evergrande, once the world’s most valuable real-estate group, is now the world's most indebted as China's epic property bubble starts to deflate.

Chinese property is in a “bubble of epic proportions”, says Matthew Brooker on Bloomberg. On some measures it “overshadows the pre-global financial crisis” boom in US housing valuations. In Shenzhen a flat costs 43.5 times the average annual salary, three times the figure for London. The market “stands comparison with the Japanese real estate bubble of the 1980s”, which inflicted a “lost decade” on the economy after it burst in 1990.
Turmoil at Evergrande
This week has brought new turmoil at Chinese property developer Evergrande. The group has been struggling to service a $300bn debt pile. Once “the world’s most valuable real-estate group”, today Evergrande is “the world’s most indebted property developer”, says Ian Verrender on abc.net.au. It is trying to sell assets to raise cash, but has warned that it could default should those efforts fall short. The company’s debt sells for less than 30 cents on the dollar. “Contractors are lining up for payment” while “tens of thousands of hopeful apartment owners are fretting” that their deposits are about to “evaporate”. Evergrande’s shares have fallen by 79% since the start of the year.
The property market has been a “key driver of economic growth” in China ever since it liberalised its economy, says Edward Witte in The Diplomat. “Owning property... is seen as a benchmark one must reach before getting married and starting a family.” The result? An estimated 70% of the country’s household wealth is in bricks and mortar. On the broadest definition, the property sector accounts for “a quarter of the Chinese economy”, says Ambrose Evans-Pritchard in The Daily Telegraph. That is “three times the relative weighting of America’s extreme bubble in 2007”. Half the world’s cranes are in China. The Communist Party has concluded that soaring prices are “triply corrosive”. Expensive housing raises financial risk, worsens inequality and is stopping families from having children.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The clampdown cycle
Authorities have clamped down, says The Economist. Last year, regulators imposed caps on how much property debt banks can hold and demanded that developers adhere to rules requiring them to keep debt under control. The results are already apparent: “Sales of new homes in 30 cities… fell by 23%”, year-on-year, in August.
Some have drawn parallels between Evergrande and the 2008 meltdown at Lehman Brothers, says Evans-Pritchard. But the comparison looks implausible because “the state retains iron control over banks”. Regulators appear to instead be “orchestrating a disguised soft-landing” for Evergrande. Chinese property regulation has historically been “stop-start”, says Brooker. Authorities try to restrain speculation, but whenever the economy weakens “the money taps open… the urgency of [dampening] home prices is temporarily forgotten”. Then the cycle repeats. Some think the latest clampdown will go further. But that would risk a “debt crisis” and a prolonged recession. The property sector “is simply too big, too overvalued and too important to the economy” to be tamed.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
How to find lost pensions, savings or investments
Losing track of money is easy to do when moving house or changing jobs so if you’ve lost touch with your cash, we outline some simple steps to find lost pensions, investments, savings accounts and Premium Bonds
-
Frasers Group 'is a rare retail gem in a battered sector'
Opinion Frasers Group is shunned for a reason, but brave investors should buy in now, says Jamie Ward
-
'Rachel Reeves' plan to force pension funds into UK assets won't work'
Opinion Hustling pension fund cash into British assets sounds like a good idea. It would be better to make Britain an attractive place to invest, says Matthew Lynn
-
Supersonic travel: How China could 'leapfrog' US and Europe's commercial aviation industry
Opinion Innovation in commercial aviation has been stuck for 60 years. A commercial supersonic jet might be back on the market soon, but will China get there first?
-
How British businesses can tackle Trump's tariffs
The majority of British businesses are likely to take a hit from the chaos caused by Trump’s tariffs to reorder global trade. Companies in the firing line face some difficult decisions, says David Prosser
-
Trump wants to colonise Mars – will it happen?
Donald Trump wants to plant the US flag on Mars. Could humans really live there?
-
Why are energy bills so expensive in the UK?
Electricity bills in the UK are higher than in any comparable rich country. Some blame the net-zero zealotry of the government for that. What is really to blame for high energy bills?
-
Will Putin invade Europe? Why investors know Russia is a paper tiger
Opinion Markets are right to ignore talk of Putin invading Europe, says Max King.
-
Why French far-right leader Marine Le Pen has been banned from running for office
Marine Le Pen, presidential candidate and leader of France's right-wing National Rally party, has been barred from standing by the country's judges.
-
Five years on: what did Covid cost us?
We’re still counting the costs of the global coronavirus pandemic – and governments’ responses. What did we learn?