Beijing, China – The real estate sector in China is facing significant challenges as authorities have indicated that struggling developers will not receive a major bailout. Minister of Housing and Urban-Rural Development, Ni Hong, emphasized that those who “harm the interests of the masses” will face consequences, including bankruptcy or restructuring in accordance with the law and market principles.
The warning comes as major real estate developers in China, such as Evergrande and Country Garden, have defaulted on their debts, leading to plummeting new home sales and uncertainty in the future of the industry. Beijing has previously implemented measures to curb property market speculation by limiting developers’ reliance on debt for growth.
Despite some developers receiving financing assistance from authorities, the national stance on reducing the role of real estate in the economy remains unchanged. The Chinese government has shifted its focus towards investing in and building up high-end manufacturing capabilities, highlighting a strategic move away from the struggling real estate sector.
Real estate once accounted for about 25% of China’s GDP, including related sectors like construction. However, UBS analysts estimated that the sector now contributes around 22% of the economy. Premier Li Qiang has outlined plans to foster a new development model for real estate, with an emphasis on building government-subsidized housing and improving systems for commodity housing.
Ni Hong stressed the importance of promoting housing sales and the development of affordable housing, while also considering the longer-term implications of changes in the property sector on China’s overall economy. The annual government gathering in China has underscored the shift towards high-end manufacturing, with less emphasis on the real estate sector during recent press conferences and meetings.