Posted on 10/21/2025 9:24:40 AM PDT by Jonty30
Photo: Qilai Shen/Bloomberg For years, international investors poured billions into China’s booming property market, drawn by promises of rapid urbanization, soaring apartment demand, and a government committed to growth. Today, that once-promising bet—valued at more than $140 billion—has become one of the biggest financial traps in modern real estate history.
Private equity firms, hedge funds, sovereign wealth funds, and pension managers from the U.S., Europe, and Asia are now stranded in distressed Chinese property assets that are nearly impossible to sell. Some portfolios have suffered 80–95% value collapses, while others are entangled in bankruptcies, halted construction, legal disputes, or regulatory freezes.
It's 0.1% of the total real estate market and 5% of the residential market.
It doesn't appear to hurt China directly, but it will devastate foreign investors.
### Context of the $140 Billion Collapse The "$140 billion collapse" refers to the unraveling of foreign direct investments (FDI) in China's real estate sector, primarily from 2015–2020, when global investors (including private equity firms, hedge funds, sovereign wealth funds, and pension managers from the US, Europe, and Asia) poured over $140 billion into Chinese property assets. This bet on China's booming market has since turned into a major financial trap amid the ongoing property crisis that began in 2020. Many of these investments are now distressed—trapped in illiquid assets facing 80–95% value losses, developer bankruptcies (e.g., Evergrande, Country Garden), halted projects, and regulatory hurdles that make exits nearly impossible. Capital controls further complicate repatriating any proceeds.
This is a subset of China's broader real estate meltdown, triggered by government policies like the "Three Red Lines" (2020) to curb developer debt, which exposed overleveraging and speculative excess. The sector, once a growth engine, has seen plunging sales (down 33% year-on-year for top developers in mid-2023), price drops (new homes fell 0.22% in May 2025 across 70 cities), and unfinished inventory valued at ~$4.1 trillion.
### Scale Relative to China's Real Estate Market China's real estate market is enormous, making $140 billion a notable but not catastrophic hit—especially as it targets foreign-held assets. Here's how it stacks up:
| Metric | Value (2025 Estimate) | Notes | |--------|-----------------------|-------| | **Total Real Estate Market Value** | ~$133 trillion | Includes residential and commercial stock; dominated by residential (~$113 trillion). China leads globally in this metric. | | **Residential Real Estate Market** | ~$2.76 trillion (annual) | Projected to grow slowly to $2.92 trillion by 2030 at 1.12% CAGR; reflects sales and transactions amid crisis. | | **Commercial Real Estate Market** | ~$0.86 trillion (annual) | Offices, retail, industrial; expected to reach $1.16 trillion by 2030 at 6.31% CAGR. | | **Foreign Investment Exposure** | $140 billion (peak 2015–2020) | Now largely impaired; part of broader FDI slowdown in property. | | **Unsold/Unfinished Homes Value** | ~$13 trillion | Equivalent to ~65 million surplus units; dwarfs the $140B figure. | | **Major Developer Debts** | $300B+ (Evergrande alone); $205B (Country Garden) | Total sector defaults exceed $1 trillion; Vanke reported $6.8B loss in 2024. |
- **Proportional Impact**: The $140B loss is ~0.1% of the total market's stock value but ~5% of the annual residential market. In the foreign FDI niche, it's devastating—wiping out nearly all gains and stranding capital. - **GDP Context**: Real estate contributes 25–30% to China's ~$18 trillion GDP (~$4.5–5.4 trillion). A $140B hit equals ~0.8% of GDP—significant for foreign confidence but minor compared to the sector's $4T+ drag from unsold inventory.
### Broader Economic Implications While not systemically threatening (China's government has avoided full bailouts, opting for targeted measures like mortgage rate cuts and a $41.5B affordable housing fund), it amplifies existing woes: - **Investor Flight**: Foreigners are dumping assets at steep discounts, signaling eroding trust. This could deter future FDI, already down amid US-China tensions. - **Ripple Effects**: Supports 50M jobs; crisis has spiked youth unemployment and deflation (prices down 8.57% y-o-y in Q4 2024). Household wealth (70% in property) is eroding, curbing consumption. - **Global Echoes**: Mirrors Japan's 1990s bubble burst but with state controls mitigating a sharper fall. IMF forecasts 4.5% GDP growth in 2025, shaved by property woes.
In short, $140B is a "big" blow for trapped foreign players—potentially the largest FDI wipeout in modern real estate history—but a ripple in China's $133T ocean. Recovery hinges on policy pivots to boost demand, though experts warn of a "long slump" without bolder stimulus.
Never invest in a communist country. You cannot believe anything you hear from them. Even if some citizen wants to tell you the truth, the totalitarian police state will not allow it.
You are correct they do not value private property rights.
Boo-hoo.
Som Ting Wong.
This is probably why they built those empty cities. Draw investors, build cheap crap, leave it empty, keep the cash.
Tariffs work.
It’s always a gamble, isn’t it? They got $$ signs in their eyes- and gambled- it didn’t pay off- or it isn’t paying off- “If it soudns too good to be true, it likely is too good to be true-” BUT if ya got $$ to gamble- and don’t mind the risk- then some might be worth a gamble- just don’t be shocked if it flails and flounders
Bkmk
Give someone else your money to hold, and watch. Every scheme works -- until it doesn't.
All those nice "private equity fund" managers, "hedge fund" managers, and "sovereign wealth fund" managers, and "pension managers" have been getting paid for doing "stuff." Sometimes it works, and some times it doesn't.
"The quickest way to double your money is to fold it in half and put it in your back pocket." - Will Rogers
Who would have guessed this would have happened
No money for you round eyes. We keep all.
What’s the dollar amount of foreign exposure in this? A couple billion? A hundred billion? And which firms are involved?
If it’s just a billion, then this is just Chicoms shuffling money from the Chinese people into the pockets of connected Chicom party members. Not my problem.
I think somebody read it correctly in that foreign investors are going to lose the $140 billion completely, because the $140 billion went into the Chinese government coffers.
Similar idea to E-currency, where people invested real money for virtual property and that’s all the Chinese property values really were, a form of virtual property with no real value once the buying stops.
Ho Lee Fu...ummm...the letter after j.
How to make a $million investing in Chinese real estate - start with a $billion
Never invest in a communist country.
—
Especially one like China, where the Party owns all of thew county’s land, and only leases parcels out for 70 years, before the parcel reverts to Party ownership.
Lemme get this straight: they did this investing in the face of the Chinese ghost cities?
I think the premise is that China was still thought to be growing in population, so the need was there for those ghost cities.
My understanding going back years is that those cities not only aren’t completed but are crumbling. Supposedly no one blows the whistle because the cities represent the investment of the savings of the Chinese people, so the scam just goes on and on. Between China being a communist dictatorship and the reality of those ghost cities I can’t fathom any serious investor getting involved.
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