
Credit: Xu Jinbai/VCG via Getty Images
People in mainland China weren’t allowed to own property until 1998. Since then, home ownership rates have blossomed. But explosive growth has also fueled a building boom that has saddled some of the nation’s biggest property developers with precarious levels of debt.
China’s massive property sector sops up steel and cement for major projects each year, creating a symbiotic relationship with the country’s construction firms. One estimate put the real estate industry’s contribution to China’s GDP at 7 percent in 2019, with related sectors like home furnishings bringing up the total to 17.2 percent.
The industry is also important for Chinese consumers as a mechanism for investment. A 2018 study estimated that Chinese citizens put nearly three-quarters of their savings into property, compared to just a third for Americans. “Chinese end-users have limited room to deploy their savings into alternatives outside China,” says Henry Chin, head of Asia Pacific research at real estate and investment group CBRE. With restrictions on overseas investment, there’s one clear outlet for their funds: “buying up properties.”
China’s cities are plagued by a diverging trend: high demand and exorbitant prices for residential properties in tier 1 cities and yet an oversupply in smaller, lower-tiered cities. And Hong Kong notoriously has the world’s least affordable housing market.
This week, The Wire examines the biggest players in China’s real estate market and looks at how they stack up with big property developers around the globe.
Global Real Estate Giants
Although China had no property market at all in the 1980s (everything was state-owned), it is now home to the world’s biggest and most powerful property developers. Big developers in China acquire state land at auction and then build high-rises developments and sell them to consumers. The scale is breath-taking. The big developers then push into other cities, borrow heavily, and build even bigger projects. And for that reason, the top 50 Chinese real estate developers now have 60 percent of the market, up from 26 percent in 2013, according to research conducted by UBS. The industry has also driven China’s urbanization, with nearly 60 percent of people in China living in an urban area in 2017 compared to less than a fifth in 1978.
The Chinese government started to rein in property developers over debt concerns in 2018, Chin told The Wire. “In 2018, 2019, all through those two years, we did see some underperformance at the second-tier, smaller developers,” Chin says. “The journey moving into 2020, because of Covid-19, things have changed quite substantially.” In order to encourage GDP growth, government officials prioritized growth instead of correcting debt problems. But now that China has made strides in its economic recovery, the reins are getting tighter.

Top Players in China and Hong Kong
Some worry that China is careening towards a housing crisis much like the United States in the late 2000s. Layers of debt are piling up as individuals take out loans to afford home ownership, and real estate companies tried to manage massive projects. Beijing worries massive debt could undermine the state-dominated banking sector.
China’s largest real estate companies have been a subject of fascination and scrutiny in the last year. As bad debt emerged as a narrative in China’s economy, major players such as Evergrande were swept up in liquidity concerns. Last fall, worries persisted for weeks about the debt of China Evergrande, the world’s largest real estate company. Its debt dropped 14 percent from June to December 2020, according to Bloomberg calculations, and now totals roughly $110 billion. Its repayment of a $2 billion bond in January eased some concerns.
The push towards deleveraging started a couple of years ago, but the policy was codified with the nation’s “three red lines” policy in fall 2020. Regulators set three debt-oriented criteria and accordingly limit how much more debt companies are allowed to take on annually with a graduated system. At the most extreme end, any company that crosses all three lines isn’t allowed to grow its debt at all.
Hong Kong, which had long been ruled separately, has been plagued with its own set of problems. The region has produced tycoons such as CK Hutchison’s Li Ka-shing and Sun Hung Kai’s Kwok brothers — Raymond and Thomas, who have dominated the island’s limited property development arena, helping make it one of the world’s most expensive cities.
Hong Kong developers are shrewd investors, and venture outside, buying at low prices on the mainland and overseas when opportunities presented themselves. China’s real estate companies, however, have rarely extended their business overseas, since they can earn big profits in the world’s fastest growing major economy. For instance, just 1 percent — 27 out of 2,689 — of Country Garden’s projects under development were outside of mainland China in mid-2020. And Wanda ran into problems when it tried to replicate its success outside of China, with a string of loss-making investments.

Greenland Makes it Big
Greenland Group started pushing overseas in about 2013, buying up assets in American, European and Asian cities. One of its most notable projects is the Pacific Park and Atlantic Yards developments in Brooklyn, N.Y., which the company is jointly developing with U.S. real estate manager Forest City. The development is put at a $6-billion cost that includes 15 buildings around the Barclays Center arena, with a commercial high rise, an MTA rail line, and residential units that include affordable housing.
But Greenland, too, has fallen into some of the same debt problems plaguing its peers. In 2019, construction on a major Wuhan skyscraper was halted after Greenland failed to pay a contractor for its work.


Hannah Reale is a staff writer with The Wire. Previously, she reported for the GBH News Center for Investigative Reporting, The West Side Rag, and her college newspaper, The Wesleyan Argus. @hannahereale