traingang

The problem is a lot more complex than what people are making it out to be.

Way too many people and corporations had invested into the property speculation frenzy post-2014 and now they are losing a lot of money as the bubble starts to burst (which also explains the slumping consumption since Covid).

Note that the sales value of new houses had plunged by 17.1% (blue line) and the area (floor space) by 12.9% (yellow line):

Pay attention to the difference between the sales value and area: the value of newly built houses is falling off at an even greater rate than previously built houses of the same size.

Local governments that had anticipated to profit off the land premium also ended up making loses and found themselves unable to repay their accumulating debt.

And the falling property prices have translated into diminishing expenditures in social spending. Just compare the expenditures of the national budget from 2024 and from 2023:

Spending on education increased only 2% last year (it was 4.5% in 2023).
Social welfare spending increased by 5.6% (was 8.9% in 2023).
Healthcare spending fell by 9.1% (was -0.6% in 2023).

We are in a complex crisis with no easy way out: either save the property prices and keep expanding the bubble further (which will make the eventual burst that much more painful), or let the property market crash and households, corporations and local governments lose a huge ton of money (which means plunging consumption and government spending and straight into recession).

The mood from this Chinese New Year reflected as much the current predicament of the economy - literally everyone I know has curbed spending on New Year’s celebration and the fanfare was nowhere near the level we had in the previous years.