Today’s housing crisis is much more severe than the last downturn, economists say, leaving the government with an even bigger challenge to clear up the mess.

By Lingling Wei and Stella Yifan Xie | Published by the Wall Street Journal

Xi Jinping aims to put the state back in charge of the crumbling property market, part of a push to rein in the private sector.

Summary

In the late 1990s, when China’s leadership started liberalizing the market, they initially envisioned a two-tiered system in which some people would buy privately developed properties, while others would live in state-subsidized housing.  

Over the following decades, however, private developers like Evergrande expanded rapidly and increasingly dominated the market. Today, more than 90% of Chinese households own their own homes, compared with around 66% in the U.S.

The shift to private ownership created enormous wealth in China. But the market’s explosive growth also sparked a debt-fueled bubble, priced many young families out of desirable housing, and dismayed Xi and other senior leaders who felt the country was straying too far from its socialist roots.

With the market plunging into turmoil last year following a years-long government campaign to rein in excess property investment, economists inside and outside China called on Beijing to take more assertive steps to restructure the sector.

… [However] past efforts to support or re-engineer the market with government support have met with mixed results.

Read the full article at the publisher’s website here