, demographic hurdles, and deteriorating foreign investment and trade. And, similar to the crisis that ultimately toppled Lehman Brothers in 2008, much of China's troubles are rooted in its property sector.
Similar to the US, which both then and now counts property as the primary source of most people's wealth, real estate in recent years has come to account for roughly 20% of China's GDP. A survey by the People's Bank of China in 2020 found that property accounted for 59% of household wealth, and three-quarters of household liabilities. That means consumer confidence — how people feel — is closely tied to the property market.
"The boom that characterized the property sector of the last decade is over," he said. "China is at a crucial moment where they cannot stop supporting the supply side, because economic growth would decelerate, but at the same time they need reforms on the demand side. Hopefully the intentions alone can generate more confidence in the market.
"If we think about the 2008 collapse in the US property market, driven by excessive wealth plowed into real estate, versus what's happening in China with much higher amounts of wealth in that sector, the scale and severity of the crisis is potentially much much worse than what happened 15 years ago in the US," Hurst said.