User:Wuwenhao19960507/Real estate in China

History

Early History of Real Estate (1840s–1949)

The origins of modern real estate enterprises in China can be traced back to the mid-19th century. After the First Opium War in 1840, foreign powers established concessions in cities such as Shanghai, Guangzhou, and Tianjin. The influx of large populations into these areas led to increased housing demand, prompting both Chinese and foreign merchants to engage in real estate development, with land values and property prices rising significantly during this period. By the 1920s, independent real estate companies had gradually replaced landlord-run rental agencies and offices, becoming the dominant force in China’s real estate sector. The industry experienced rapid growth until the full-scale outbreak of the Second Sino-Japanese War in 1937. After the war ended in 1945, the real estate market briefly recovered as wartime migrants returned home. However, with the eruption of the second phase of the Chinese Civil War in 1946, the industry began to decline. Prior to the establishment of the People’s Republic of China in 1949, foreign-owned properties in China totaled over 10 million square meters, concentrated in major cities such as Shanghai, Nanjing, and Beiping (now Beijing), and were held by entities from 34 countries including the United Kingdom and the United States.

Public Ownership and Welfare Housing (1949–1978)

From the founding of the People's Republic of China in 1949 until 1978, a fully public ownership economic system was implemented. Urban land was entirely nationalized, and all properties owned by Nationalist government and its military and political officials were confiscated. Foreign-owned real estate was also uniformly brought under state ownership. Remaining properties were turned into state assets through means such as takeover, requisition, debt repayment, or purchase. All public properties were managed uniformly by government departments. Initially, a small number of privately owned properties were allowed to operate legally, but these were gradually expropriated during the Socialist Transformation and the 1958 state buyout—a process that scholars have described as eliminating the real estate industry as an independent economic sector.

Xuguangli in Nanjing, a work unit-assigned building constructed as communal housing during the planned economy era.

Before the 1978 Reform and Opening-Up, Mainland China operated under a centrally planned economy. Housing was not treated as a commodity but as a form of welfare. Productive real estate, such as factory buildings and infrastructure, was financed and allocated by the state without compensation, while non-productive housing, including employee residences, was also planned, constructed, and distributed by government agencies and state-owned work units under a unified administrative system. Scholars have noted that housing was financed by government capital expenditure and allocated by work units, with user-residents paying only nominal rents. This model placed long-term fiscal pressure on state institutions responsible for maintenance and service provision. In the late 1970s, official surveys indicated that average urban living space per person was below 4 square meters, reflecting a severe housing shortage. Many residents lived in overcrowded communal apartments(Communal apartments in China), often sharing kitchens and bathrooms with multiple households.

Early Housing Reform and Market Experiments (1979–1991)

In October 1979, China's first commercial housing project, Donghu New Village in Guangzhou, was approved for construction. In January 1980, the Shenzhen Special Economic Zone saw the signing of the country’s first cooperative housing construction contract, as well as the establishment of the first real estate enterprise in mainland China — the Shenzhen Special Economic Zone Real Estate Company（the Shenzhen Special Economic Zone Real Estate Company）.

In June 1980, the Central Committee of the Chinese Communist Party and the State Council officially approved the implementation of housing commodification by endorsing the Outline Report of the National Conference on Capital Construction. The policy permitted private individuals to build, purchase, and own residential properties. By October of the same year, 128 cities and several counties and towns across the country had launched pilot programs for private housing construction and sales.

On April 12, 1988, the First Session of 7th National People's Congress adopted a constitutional amendment, revising Article 10, Paragraph 4 of the Constitution. The original provision — “No organization or individual may usurp, buy, sell, lease or otherwise illegally transfer land” — was amended to: “No organization or individual may usurp, buy, sell or otherwise illegally transfer land. The right to the use of land may be transferred in accordance with the provisions of the law. The 1988 constitutional amendment has been interpreted by scholars as a formal recognition of the shift toward marketization in China’s land use system.

In May 1990, the State Council promulgated the Interim Regulations of the People's Republic of China Concerning the Assignment and Transfer of the Right to the Use of the State-Owned Land in the Urban Areas, officially launching the nationwide implementation of the paid land-use rights transfer system.

Housing Commercialization and Privatization (1992–2003)

Following Deng Xiaoping’s 1992 “Southern Tour,” market reforms accelerated across various sectors, including housing. In 1994, the State Council issued the “Decision on Deepening the Urban Housing Reform,” which formally laid out the goal of establishing a housing market based on private ownership and monetary compensation, replacing the decades-old welfare allocation system（Welfare allocation system）.

In 1998, the State Council issued a directive formally ending the practice of in-kind housing allocation by work units. From that point onward, housing was no longer provided by work units , and urban residents were encouraged to purchase housing through the commercial market. Millions of state-owned housing units were sold to employees at subsidized prices, significantly increasing the proportion of privately owned housing in urban areas. Scholars have interpreted this shift as a critical step in the commodification and privatization of urban housing in China. Concurrently, the reform of housing finance（Reform of housing finance）played a key supporting role. The Chinese government expanded access to mortgage lending, encouraged the growth of commercial banks, and promoted the development of a secondary housing market. Real estate enterprises began to play a more prominent role in the urban economy, while local governments increasingly relied on land conveyance fees as a significant source of revenue—a trend that would intensify in later years.

Market Dynamics

Market Entities and Structural Trends

According to data from the National Bureau of Statistics of China, the number of real estate development enterprises in Mainland China rose from 89,859 in 2012 to a peak of 105,434 in 2021, before declining to 100,111 by 2023.1 Throughout this period, over 95% of enterprises were domestically funded, demonstrating the overwhelming presence of local capital in the industry. Enterprises funded by investors from Hong Kong, Macao, and Taiwan declined from 3,451 in 2012 to 2,448 in 2023, while foreign-funded enterprises fell from 1,713 to 734, indicating a long-term reduction in external participation.

Employment in China's real estate sector remained relatively high until 2020, when it peaked at approximately 29.0 million people. However, employment levels declined significantly thereafter, falling to around 20.0 million by 2023. This reduction in workforce size corresponds with a broader cooling trend in the real estate market during the early 2020s.

Completed investment in the real estate sector rose from 7.18 trillion yuan in 2012 to 13.76 trillion yuan in 2021, before declining to 11.21 trillion yuan in 2023. The construction area under development showed a similar trajectory, expanding from 573 million square meters in 2012 to 975 million square meters in 2021, then dropping to 840 million square meters by 2023.

Scholars have observed that the real estate sector's shift from rapid expansion to consolidation in the early 2020s was influenced by regulatory reforms, such as the "three red lines" policy, tighter financing conditions, and declining housing demand.

Government Intervention and Policy Shifts

Since the mid-2010s, the Chinese government has introduced a series of regulatory measures aimed at stabilizing the real estate market and discouraging speculative investment. In 2016, the central government adopted the principle that“houses are for living, not for speculation,” a slogan first emphasized by President Xi Jinping and later incorporated into national housing policy.

In August 2020, the Ministry of Housing and Urban-Rural Development introduced the "three red lines" policy, setting thresholds on debt ratios for property developers based on liabilities-to-assets, net gearing, and cash-to-short-term debt ratios. Following its implementation, several major developers, including China Evergrande Group, faced liquidity challenges. The International Monetary Fund (IMF) noted growing stress in China's property sector, observing that financial strains at Evergrande had begun to spill over to other developers.

In response to the slowdown in the housing market that followed, the Chinese government began to implement supportive measures in 2022 and 2023. These included reductions in mortgage interest rates, lower down payment requirements, and expanded funding for affordable housing projects. Local governments were also granted greater flexibility to adapt housing policies according to regional conditions.

Despite these interventions, challenges persisted into 2024, prompting the Chinese government to further expand credit support. In early 2024, the Chinese government announced plans to provide approximately 4 trillion yuan (about US$560 billion) in financing for approved housing developments, as part of broader efforts to stabilize the sector and bolster economic activity.