China’s property market is in a panic — and its slumping tech sector is looking abroad
A proper(ty) predicament… China’s growth forecasts are getting slashed as its property market wavers. FYI: up to three-quarters of China’s household wealth is in real estate. Home sales have slipped for 11 months straight (China’s longest slump on record) while property prices have tanked. The US may be in a housing recession, but China is in a full-on property-market depression.
- Profits: Country Garden, China’s biggest developer, saw profits plunge 96% in the first half of the year. Evergrande, China’s second-largest developer with $300B in debt, defaulted on its US bonds in December.
- Protests: Hundreds of thousands of Chinese homebuyers are refusing to pay their mortgages because of building delays and sinking property prices.
- Plan: To spur investment, China’s central bank slashed the five-year mortgage rate by 15 basis points, matching its biggest cut on record.
Beyond real estate… China’s tech sector is slowing after intense Covid crackdowns and regulatory heat (think: big fines). Amazon rival Alibaba and Tesla competitor Xpeng just suffered their slowest quarterly growth ever, while gaming giant Tencent posted its first sales decline. To swerve a struggling domestic economy, tech titans are trying to expand into the US:
Real estate’s stuck at home… even though companies can expand internationally. China’s property industry accounts for up to 30% of its GDP — roughly 2X as much as in the US. While experts say a 2008-style housing-and-financial-crisis combo isn’t likely, China’s property problems extend beyond its borders: every 1% decline in China’s GDP is estimated to cause a 0.3% dip in global GDP.