August 24, 2023
However, China’s economy has been negatively influenced not only by past pandemic rules and regulations but also by the forced contraction of the real estate sector. The austerity measures implemented by the government undermined construction growth and influenced major developers’ ability to repay their massive debts. In 2020, regulators initiated “the three red lines” policy that compelled developers to share additional information about their leverage.
For example, Evergrande announced it incurred an $81 billion loss between 2021 and 2022. Efforts to restore China’s real estate sector are coming too late to save Evergrande which has just filed for bankruptcy protection in the U.S. has noted, “if the challenges in the property sector deepen and bring risk aversion in the financial system and affect consumer confidence, this will cause a deeper slowdown in China.”, believes unresolved and unsustainable land sales and local government debt pressure will have dire consequences for the Chinese economy.