China’s property sector is sinking. Once the economic backbone by which hundreds of million Chinese went from poverty to the middle class, the industry is now seeing slumps in the value of real estate that threaten not only household wealth and revenue for local governments, but also the overall growth of the Chinese economy, a key indicator of the Chinese Communist Party’s legitimacy and right to rule.

Behemoth property developers such as Evergrande and Country Garden have gone under. In an attempt to mitigate the fallout, Chinese authorities last week rolled out stimulus measures designed to stabilize the market and to prevent the downward spiral that has seen the value of new homes sold drop by over 23 percent through August 2024.

In the United States, the housing market’s combined contribution to GDP generally averages 15-18 percent, according to the National Association of Home Builders. Contrast that to China, where the housing market once accounted for more than 25 percent, and as much as 29 percent, of China’s GDP. When one considers the economic devastation and property foreclosures that occurred in the United States during the Global Financial Crisis of 2007 to 2008, in an economy far less exposed to real estate than China’s, the risk from China’s property implosion to its overall economic health becomes alarmingly clear.

Not only has the value of housing sold dropped by nearly a quarter, but the average price of those homes that are being sold has plunged.