Chinese minister of Housing and Urban-Rural Development, Ni Hong, has according to CNBC announced that key real estate developers may have to go bankrupt - even potentially during 2024.
The Chinese Real Estate sector has seen major turbulence marked by the defaults of real estate giants Evergrande and Country Garden. The Chinese government has attempted to intervene and alleviate the real estate crisis, but has now taken the hard line against the real estate giants.
“For real estate companies that are seriously insolvent and have lost the ability to operate, those that must go bankrupt should go bankrupt, or be restructured, in accordance with the law and market principles,” Ni Hong, Minister of Housing and Urban-Rural Development, said at a press conference Saturday.
“Those who commit acts that harm the interests of the masses will be resolutely investigated and punished in accordance with the law,” he said accoring to CNBC. “They will be made to pay the due price.”
During the 2000s and 2010s, China experienced a real estate boom, marked by rapid urbanization and soaring property prices. This period was characterized by aggressive investment in property development, fueled by both domestic and foreign investors attracted by high returns.
The Chinese government played a key role, supporting the boom through relaxed regulations, easy credit policies, and infrastructure spending, aiming to stimulate economic growth.
However, this led to a significant increase in debt among real estate companies and concerns over property bubbles. For investors, this era highlighted the lucrative potential of China's property market, alongside the risks associated with regulatory changes and economic policies.
The government's support for the real estate sector has been a double-edged sword, driving growth but also contributing to financial vulnerabilities.