A residential property is under construction in Nanning City, South China's Guangxi Zhuang autonomous region. To entice buyers, the housing enterprise launched a campaign that gives buyers a 10-year pass to ride the metro lines for free.

Publication Type

Why China's housing policies have failed

Tianlei Huang (PIIE)

Working Papers 23-5
Photo Credit: CFOTO/Sipa USA


This working paper reviews the current housing crisis in China and explores the roles of supply-demand imbalances and local governments in the real estate sector. To prevent the housing downturn from further dragging down economic growth, Beijing suspended the financing restrictions on developers imposed in August 2020. These restrictions, known as the "three red lines" that limited new borrowing by developers, led Chinese property developers to default on a record number of debt obligations and triggered the most serious housing slump China has seen since 1998. The property sector saw its value added decline by more than 5 percent in 2022, even as the overall economy grew at 3 percent. But the current dynamics in the housing market reflect a repeated pattern: Loosening financing restrictions on developers and using housing as a macroeconomic stabilization tool risk reinforcing the boom-bust housing cycle. China's real estate sector is a systemic problem. Without serious reforms to address concerns such as supply-demand imbalances and local governments' deep connections with real estate, housing slumps like the one in 2022 may recur.

Data Disclosure:

The data underlying this analysis can be downloaded here [zip].

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