Housing bubble bursts; A threat to China's growth? ▫ The construction boom can be the engine of economic growth; But when investment in housing exceeds real demand, each new unit may yield a lower return than before. This is the diminishing return on investment. ▫ China's real estate investment share, which reached about 10% of GDP in 2020, will drop to about 5% by the third quarter of 2025. This trend is reminiscent of Japan's experience after the bursting of the housing bubble in the early 1990s. ▫ But the importance of housing recession is not limited only to the construction industry. In China, housing makes up a large portion of household wealth. Therefore, the drop in housing prices can weaken people's sense of wealth, reduce consumption, and thus transfer the recession to other sectors of the economy. However, preventing a banking crisis does not necessarily mean solving structural problems. Can China escape the trap of a prolonged housing slump or will it face years of weak economic growth? The link of this program is in the mechanism.

Housing bubble bursts; A threat to China's growth? ▫ The construction boom can be the engine of economic growth; But when investment in housing exceeds real demand, each new unit may yield a lower return than before. This is the diminishing return on investment. ▫ China's real estate investment share, which reached about 10% of GDP in 2020, will drop to about 5% by the third quarter of 2025. This trend is reminiscent of Japan's experience after the bursting of the housing bubble in the early 1990s. ▫ But the importance of housing recession is not limited only to the construction industry. In China, housing makes up a large portion of household wealth. Therefore, the drop in housing prices can weaken people's sense of wealth, reduce consumption, and thus transfer the recession to other sectors of the economy. However, preventing a banking crisis does not necessarily mean solving structural problems. Can China escape the trap of a prolonged housing slump or will it face years of weak economic growth? The link of this program is in the mechanism.