CCP Purged Top Real Estate Executives in 2023 Amid China’s Property Market Woes

Unfinished apartment buildings at the Phoenix City residential project, developed by Country Garden Holdings Co., in Shanghai, China, on Jan. 17, 2022. The crisis engulfing China's property sector has the developer's shares and bonds hammered amid fears that a reportedly failed fundraising effort may be a harbinger of waning confidence. (Qilai Shen/Bloomberg via Getty Images)

China’s property sector rapidly declined in 2023, with real estate giants like Evergrande Group and Country Garden on the verge of collapse. At the same time, Beijing launched investigations to purge several senior executives in the failing industry.

The real estate sector has been a critical part of the Chinese economy, especially after China joined the World Trade Organization in 2001. Foreign capital led to the accelerated development of China’s economy, with the property sector accounting for about 30 percent of GDP at its peak. As a pillar of the economy, a crisis in the real estate sector could pose significant risks to the country’s overall economic well-being.

Mike Sun, a U.S.-based investment strategist and China expert, told the Chinese language edition of The Epoch Times that Chinese Communist Party (CCP) leader Xi Jinping’s rhetoric at the 20th Congress in 2022 was geared toward reshaping China’s economic landscape, which involved a shift from the real estate sector to a greater emphasis on electric cars and the high-tech industry.

Increased Investigations, Disappearances

2023 marked a period of salary reductions, layoffs, and resignations in China’s real estate sector. Several top executives were placed under investigation, and some have faded out of public view. At least more than a dozen executives have been removed from their posts. The most prominent figure among them was Hui Ka Yan, chairman of Evergrande Group, who was arrested by Chinese authorities on Sept. 28 on unspecified charges. One of his sons and a former CFO of the company was also arrested.

“Whether it’s a crackdown by the CCP leadership on the real estate sector or a policy shift, it’s bound to impede on the interests of many. In the past, real estate was an attractive investment, and many people in China made money and got rich through real estate. Once the investigations were launched, many unlawful practices would be revealed, and many executives are bound to be arrested,” Mr. Sun said.

Dumping Real Estate Stocks 

Due to China’s economic decline and real estate bubble, China’s real estate stock prices dropped sharply by the end of 2023. As of Dec. 18, the stock prices of China A-share-listed real estate companies fell 20.55 percent from the beginning of the year, and H-shares fell 32.15 percent. Compared to the start of the year, the total market value of the 181 listed real estate companies in Shanghai and Shenzhen evaporated by 27.75 percent.

Currently, the total market capitalization for China’s real estate sector stands at about 1.2 trillion Chinese yuan (about $170 billion), which is its lowest point in three years, according to Chinese media reports.

In August 2023, the Central Committee of the CCP and various levels of local governments implemented stimulus policies for the property sector. Still, the market continued its downward trend due to a number of factors, such as a decrease in consumer spending and a decline in housing prices.

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A total of 43 China A-shares were compulsorily delisted in 2023, of which eight companies were real estate firms, which accounted for the highest percentage in all sectors. These delisted companies, including Tahoe Group and Yango Group, were once thriving and involved in the development of several renowned projects in the country.

Many market players and analysts once believed the real estate boom would last at least another two decades.

‘Double-Digit Contraction’ in 2024

Mr. Sun explained that there is an industry standard for analyzing real estate development trends in China. “Short-term trends depend on policy, medium-term trends depend on land development, and long-term depends on the population.”

“China’s current situation shows that there is a major problem in economic policy, with land becoming increasingly scarce and the birth rate dropping sharply. China’s massive number of deaths during the COVID-19 pandemic may have contributed to a sharp drop in the population.”

Mr. Sun said China’s real estate will not return to its former glory.

He pointed out that Huang Qifan, the former mayor of Chongqing city, said in 2019 that China does not need 100,000 real estate companies but only around 10,000.

At the end of 2023, Goldman Sachs analysts predicted that China’s real estate investment would see a “double-digit contraction” in 2024 and that the continued downturn in real estate would lead to a one-percentage-point drop in China’s GDP growth.

Aside from the property sector, the financial industry faces a regulatory crackdown as part of Beijing’s goals to transform China’s economic structure.

“There are more than 4,000 small- and medium-sized banks in China, and many of them are now in trouble,” said Mr. Sun, adding, “Thousands of banks may disappear or be reorganized one by one.”

Xin Ning contributed to this report.