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Opinion | China’s property market isn’t so much collapsing as being reconfigured
Viewing China’s real estate crisis solely through the lens of market indicators misses the deeper, structural shifts at play
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For years, China Vanke was the property industry’s model pupil: prudent, reliable and seemingly immune to the reckless borrowing that felled its peers. That reputation evaporated in a matter of weeks.
On the night of November 26, Vanke announced that it would convene a bondholder meeting to discuss maturity extensions. This move was immediately interpreted by the market as a sign of potential default risk, sparking panic among investors.
After four and a half years of falling stock prices, Vanke now faces a humiliating double blow in both stocks and bonds. Its stock price hit a 10-year low, and some of its bonds plunged by more than 20 per cent during that week. With a debt extension requiring near-unanimous creditor approval, the once-unthinkable prospect of a Vanke default is now a distinct possibility.
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Vanke’s distress is acting as a major drag on property stocks, and the market has begun to worry about the systemic stability of China’s real estate market. Wall Street has taken note. Nomura and other investment banks are predicting another year or two of pain. The consensus in global financial capitals is that the Chinese property miracle is already dead.
However, viewing this crisis solely through the lens of market indicators misses the deeper, structural shifts at play. A look at the history of China’s housing experiment – from the stagnation of the planned economy era to the urbanisation of the reform era – suggests that the real estate industry is not dying but a vital organ in the midst of a painful, necessary reconfiguration.
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Whatever is happening now, remember this: China’s housing market was born out of deprivation, not speculation. The first three decades of the People’s Republic were an era of industrial triumph but residential failure. While the population nearly doubled between 1949 and 1978, housing construction ground to a halt.
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