China's property sector collapse reveals a debt-driven Ponzi model

Homebuyers in China face mortgage risks, unfinished homes, and delays as the country's real estate sector collapses. The crisis was driven by a debt-driven growth model based on ever-increasing leverage and continuous refinancing. This model functioned as a Ponzi scheme, relying on new buyers to take over and the belief that prices would always rise. The collapse of this system is exemplified by China Evergrande, which amassed approximately US$300 billion in liabilities before its 2021 meltdown. National Bureau of Statistics data shows the sector's continued weakness: real estate investment fell 11.2 per cent in the first quarter, and new home sales dropped 16.7 per cent. Mortgage lending declined 34.6 per cent, and domestic loans to developers fell 23.7 per cent.