In May 2026, the financial sector of the People's Republic of China continues to be under powerful pressure from a protracted crisis in the real estate market, which once provided about a quarter of the country's total gross domestic product. Events surrounding former giant developers have moved into the final legal and criminal plane. The processes unfolding in mainland China and Hong Kong clearly demonstrate to global investors that Beijing has chosen a course of a harsh cleanup of the market from toxic debts and punishing the guilty, while simultaneously trying to prevent a total collapse of the entire banking system. The situation is aggravated by the fact that the destruction of the construction sector has already led to colossal capital losses for the middle class, significantly restraining domestic consumption and slowing down the overall recovery rate of the world's second-largest economy.
The most resonant financial event of recent weeks was the conclusion of the trial against the former head and founder of the bankrupt China Evergrande Group. Hui Ka Yan, who had been in custody for a long time after his detention and did not appear in public, officially pleaded guilty in court and expressed deep remorse for the large-scale financial machinations that led to the formation of an astronomical debt of over three hundred billion dollars. This judicial confession puts a legal end to the history of the company's multi-year aggressive expansion, which was supported by the uncontrolled attraction of loans and funds from ordinary apartment buyers. Following the official delisting of Evergrande's shares from the Hong Kong Stock Exchange, the process of forced liquidation of the conglomerate's property has entered its most active phase. At the same time, the developer's collapse triggered a powerful avalanche reaction in the field of international auditing. Court-appointed liquidators launched a massive legal attack on the company PricewaterhouseCoopers, which for years had confirmed the satisfactory financial condition of the builder. Against the backdrop of these events, Chinese regulatory authorities made an unprecedented decision, temporarily suspending the activities of this auditor's unit in mainland China for six months and imposing multi-million dollar fines. Such harsh punishment for one of the representatives of the Big Four accounting firms indicates the authorities' intention to completely reform the financial control system and force financial institutions to bear real responsibility for concealing debts in the real estate market.
Evergrande's problems turned out to be only the tip of the iceberg, as the systemic crisis affected absolutely all key players in the market. Country Garden, which for a long time held the first place in China in terms of housing sales volume, is now likewise in the process of a complex restructuring of its multi-billion dollar offshore obligations under the constant threat of receiving a court liquidation order. New anti-records are also being recorded by the state-owned giant China Vanke, which was long considered the most stable and protected developer due to support from local authorities. The decline in sales and limited access to liquidity forced Vanke's management to hold urgent negotiations with state banks regarding the extension of loans and the emergency opening of new credit lines secured by commercial properties. A similar crisis situation is observed among second- and third-tier developers, including well-known companies such as Sunac, Logan, and Shimao. Most of them have declared defaults on their bonds and are now trying to offer foreign and domestic creditors schemes to exchange old papers for new long-term obligations or shares of subsidiary companies. Global financial analysts state that the total losses of Chinese households from the fall in housing prices over the past few years have reached astronomical scales, significantly depreciating citizens' savings and forcing them to reorient toward maximally conservative behavioral models, which negatively affects the revenues of retailers and technology giants in the PRC.
In response to the protracted depression in the housing sector, the People's Bank of China, together with the Ministry of Finance, deployed a massive campaign to rescue the market. The latest package of measures includes a significant reduction in the requirements for the down payment on mortgage loans to a historical minimum, as well as the abolition of the lower limit of interest rates on housing loans in many regions of the country. In addition, the central government allocated significant financial resources to local authorities to buy up unsold apartments from developers for the purpose of their subsequent conversion into social housing. However, despite the unprecedented volumes of financial injections and the easing of monetary policy, the market reaction remains rather restrained. Potential buyers are in no hurry to invest funds in real estate due to the fear of a further drop in prices and low confidence in the stability of their own future incomes. International rating agencies point out that state programs help reduce panic in the market and protect large banks from the immediate threat of bankruptcy; however, they are only capable of stabilizing the current situation, rather than returning the sector to its former growth rates. The Chinese economy is going through a painful period of transformation, where real estate is permanently losing its status as the main tool for wealth accumulation, giving way to investments in high-tech manufacturing and green energy.
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