Real Estate Dependency: Is China Relapsing as teh Economy Falters?
businessbriefs.substack.com
China has been dependent on its real estate sector to drive its growth plans. The country’s focus on growth, combined with perverse incentives for local governments, banks, real estate companies, officials and citizens ensured that its real estate sector grew unabated. By the time the government realised the problems and introduced the “three red lines” guidelines to stabilise the sector, it was already too late. Evergrande and other troubled developers had depended on a continual flow of funds from banks in order to fund land purchases and operations. The guidelines prevented them from taking on more debt, creating a cash flow crunch during a period of low demand.
Real Estate Dependency: Is China Relapsing as teh Economy Falters?
Real Estate Dependency: Is China Relapsing as…
Real Estate Dependency: Is China Relapsing as teh Economy Falters?
China has been dependent on its real estate sector to drive its growth plans. The country’s focus on growth, combined with perverse incentives for local governments, banks, real estate companies, officials and citizens ensured that its real estate sector grew unabated. By the time the government realised the problems and introduced the “three red lines” guidelines to stabilise the sector, it was already too late. Evergrande and other troubled developers had depended on a continual flow of funds from banks in order to fund land purchases and operations. The guidelines prevented them from taking on more debt, creating a cash flow crunch during a period of low demand.