The sector is dangerously overheated – but unlike the 2008 financial crisis, the global ripple effect is likely to be limited, says professor of economics Keyu Jin
repay their debts
The short-term pressure on the Chinese economy is real, but China is not about to experience a severe housing crisis. For one, Chinese households, which should allow them to address interest payments relatively easily. This is not a situation like in the US or Europe in 2008, which saw highly indebted homeowners unable to make their basic payments.
What we are seeing today is already the third major property market cycle in the last 10 years. The state has its reasons to intervene: winning the hearts of the middle class starts with providing them with more affordable housing. An overheated sector also poses a threat to financial stability. In the past, profligate real estate companies have expanded into areas unrelated to property, while many other businesses turned to investing in property rather than focusing on their core operations.
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