The 120km train ride between the cities of Luoyang and Zhengzhou is a showcase of economic malaise and broken dreams. From the window endless, half-built residential towers pass one after another for the duration of the hour-long journey. Many of the buildings are near completion; some are finished and have become homes. But many more are skeletons where construction ceased long ago. Developers have run out of cash and can no longer pay workers. Projects have stalled. Families will never get their homes.
The train ride through China’s heartland helps to explain one of the country’s biggest crises in recent memory: the public’s loss of confidence in the government’s economic model. For decades the property industry has been symbolic of China’s rise. Private entrepreneurs have made vast fortunes. Average people have witnessed their net worth soar as home values trebled. Local governments have filled their coffers by selling vast tracts of land to developers. An astonishing 70% of Chinese household wealth is now tied up in real estate.
To undermine trust in this model is to shake the foundations of China’s growth miracle. With sweeping covid-19 lockdowns and a crackdown on private entrepreneurs, this is happening on many fronts. But nowhere is it clearer than in the property industry, which makes up around a fifth of gdp….
To undermine trust in the government’s economic model is to shake the foundations of China’s growth miracle https://t.co/jTSwESdVxM
— The Economist (@TheEconomist) September 15, 2022