For decades, China's economic growth has been largely driven by a booming real estate sector, fueled by rapid population growth. From 1997 to 2017, real estate-related activities' share of China's GDP rose from less than 10% to approximately 30%.
Since 2020, however, major Chinese property developers such as Evergrande and Country Garden have faced insolvency concerns, partly due to falling returns on real estate investment as China's population growth slows. Additionally, both housing activity and home prices have been in persistent decline since 2021.
Thus far, the CCP has undertaken modest policy measures to stabilize the housing sector, including incrementally lowering short-term interest rates and relaxing some regulations on housing investment. However, it has stopped short of bailing out property developers and homebuyers or launching a large-scale cash transfer program, sometimes referred to as the "bazooka option" by economic commentators and compared to the US's economic responses to the 2008 financial crisis and the covid pandemic.