In a viral video summarizing China's bursting real estate bubble, officials told citizens to “buy one set first, then buy another set.” Bought a second? buy a third, a fourth'

, the remarks went viral on Chinese social media, with netizens making fun of the request. The Chinese version of Douyin is filled with videos of Deng Xiaoping speaking, each attracting tens of thousands of user comments. One user responded sarcastically: “It’s as easy as grocery shopping.” Others questioned where they got the money to buy multiple homes.

Deng Xiaoping’s speech underscored China’s efforts to contain the growing crisis effort. For decades, Chinese citizens have poured cash into real estate, where a large portion of Chinese household wealth — 70 percent — is stored. In China, home buyers need to pay upfront to buy a home. These pre-sale funds essentially provide real estate developers with interest-free loans to rapidly expand construction projects. But the central government noticed the bubble in the property market and tried to control the ability of developers to borrow money easily. When cash flow is constrained, it results in stalled construction projects and semi-finished homes. This means that many homes that people buy and pay for in full are not actually built. The crisis has intensified in recent weeks as homeowners across the country start to refuse mortgage payments as projects stall and homes remain unfinished.
China’s real estate crisis threatens social stability – China’s middle class has long relied on real estate as its main source of wealth, It accounts for 25% of China’s economy. That means Chinese citizens are seeing their favorite way of investing no longer work for them — at the same time China is facing its worst economic slowdown in decades.

National Boycott

China’s debt-fueled real estate market has been in turmoil since Evergrande — China’s most indebted developer with $300 billion in debt — defaulted on its dollar bond repayments and nearly collapsed last year . Since then, the industry has faced a severe cash crunch, with many developers unable to pay suppliers and builders, or deliver finished apartments to homeowners who have paid. Chinese homeowners began banding together in July to protest and boycott mortgages. Over the past few weeks, homeowners have crowdsourced documents that tally the number of mortgage boycotts and project delays nationwide, and have sent letters to government officials detailing their woes. Chinese censors are trying to weed out these crowdsourced documents and social media posts talking about boycotts and project delays. Chinese authorities have also tried to reassure homeowners that their units will be delivered. But protests and mortgage boycotts spread quickly—both online and offline. Homeowner groups in at least 100 Chinese cities have threatened or started boycotting their mortgage payments, affecting more than 320 housing projects, according to crowdsourced listings on GitHub, an online file repository Chinese homeowners use to share files. Chinese homebuyers usually focus on the resources of the whole family to buy a house, and have become accustomed to the fact that house prices will only rise. But that won’t happen if the house is still unfinished. “It’s a matter of life and death…if their home becomes negative equity,” Alfred Wu, an associate professor at the National University of Singapore, told Bloomberg in July. A broad mortgage boycott could exacerbate a liquidity crunch for developers. An estimate by Australian bank ANZ said the protests could affect more than $220 billion worth of lenders’ home loans.

Front bumps China’s central government now faces a dilemma: Find a way to boost consumer confidence in the property market and end the boycott without fully bailout property developers. An obvious solution would be for the government to step in and rescue the country’s struggling property developers, who could then resume housing construction projects. But Song Houze, a fellow at the Paulson Institute, a think tank focused on U.S.-China relations, wrote in an August report that such a solution would be politically challenging because Beijing fears it would shift all costs away to the central government. This means it depends on smaller local municipalities. “As of now, solving the problem has been left to the local governments’ own equipment. But as the problem has grown, they have become more and more… city,” Song said. “This means that compared with the financial capacity of these local governments, the scale of relief needed is disproportionately large.” The Shimen real estate fair where Deng Bibo spoke, a total of 19 developers and 10,000 houses participated in the exhibition. The county is offering any potential homebuyer a coupon worth $442 and promises to subsidize 50 percent of the property tax on any home sold. Local officials in other counties also took matters into their own hands: officials in Yulin, Guangxi, went door-to-door telling villagers to collectively buy at least 8,000 homes this year, according to Chinese media reports. In response to public outcry over Deng’s speech, Shimen County officials told Chinese media that he was just trying to encourage people to buy houses, not to overanalyze his words. Song believes the current mortgage crisis will be “much worse” than Evergrande’s default a year ago. “The solution will require Beijing to spend a lot of political capital, not just financial capital,” he said.