BEIJING—China's property bust continues to weigh on economic growth, a direct consequence of President Xi Jinping's policies designed to rein in real estate debt. The government's crackdown cut real estate debt by 17 percent, aiming to reduce speculation and systemic risk.
Despite the intervention, house prices are still falling five years after the initial policy shifts. The deliberate deflation of the property bubble triggered widespread developer defaults and sharp declines in property values across the country.
The downturn is eroding household wealth and straining local government finances. Millions of unfinished homes remain in limbo, leaving buyers awaiting completion or compensation and further undercutting consumer confidence.
China's artificial intelligence sector has not provided the economic lift needed to offset the property market's drag. China faces structural disadvantages compared to the United States in building out AI capacity.
The United States has deep capital markets, making it easier for companies such as OpenAI to raise large sums quickly. That financial infrastructure supports rapid expansion in advanced technology.
China, by contrast, faces a harder path to heavy AI investment—particularly in hardware. Export controls from other countries block bulk chip sales to China, limiting its ability to build the infrastructure AI requires.
Restricted access to advanced semiconductors means the technology sector cannot substitute for the deep losses in property. The two sectors operate under different policy and market conditions.
The property market's slump may suppress China's overall economic growth for years. The distortions that inflated the original real estate bubble persist, even after the government's effort to reduce systemic risk.
With no clear alternative growth engine in sight, the economy faces sustained headwinds.
