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How did the tower project in China turn into a "graveyard" (apartments and businesses were sold for nothing)? Will we have the same fate?

2025-08-28 11:32:57Fokus SHKRUAR NGA REDAKSIA VOX
How did the tower project in China turn into a "graveyard" (apartments
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Henan province on the outskirts of Beijing is filled with the skeletons of residential towers, glassless window spaces, abandoned concrete squares... This is the bleak panorama of the collapse of "Evergrande", China's largest construction company, which disappeared from the Hong Kong stock exchange with the weight of over 300 billion dollars in debt.

This is not the story of just any failure, but the official failure of a development model that has supported the world's second-largest economy for 25 years: growth through construction, making housing the only safe investment and pushing urbanization to the point where real estate accounts for a third of Gross Domestic Product.

Evergrande's story began with the rapid urbanization that marked China from the 1990s onwards. Millions of people moved from villages to cities and demand for new housing soared. When the group went public on the Hong Kong stock exchange in 2009, it raised billions and established itself as a symbol of urban and prosperous China. In less than ten years, the value of its shares had increased fivefold and the company expanded beyond construction: it created an electric car brand, invested in tourism, healthcare and even football, when it bought Guangzhou FC and turned it into the country's champion team.

But this growth was all built on debt. Evergrande bought land on credit, sold apartments before construction even started to raise liquidity, and accumulated a financial exposure of over three hundred billion dollars. In 2020, Beijing imposed new rules, the so-called “three red lines,” to curb debt and stabilize the sector.

From that moment on, the mechanism was blocked: the company could no longer refinance its obligations with new loans, creditors withdrew, and construction sites began to slow down. The pandemic and the decline in demand for housing deepened the crisis, turning the purchase of an apartment from a guarantee of security into a financial trap for millions of families.

Today, 1,300 unfinished projects in 280 cities have become “environmental specimens,” half-finished neighborhoods, buildings being built without facilities, families who have paid tens of thousands of dollars in deposits and installments, but who only own a contract and not a house. In China, apartments are often purchased before construction: that is, citizens’ savings finance the construction sites themselves. When the project stops, they are left with only the debt to the bank and an empty construction site. In protest, many families have refused to repay their loans, further aggravating the debt crisis, writes VoxNews.

The effects are spreading like a chain reaction: cement, steel, glass, electrical plant companies, real estate agencies and furniture companies are losing contracts worth billions. Tens of millions of people work in construction-related sectors, so the slowdown means layoffs and lost wages. Investors, Chinese and international, have seen their shares turn into worthless paper. Faced with $45 billion in claims, liquidators have so far recovered only $255 million by selling marginal assets: a Monet, luxury cars and club membership cards. Almost total losses for banks and funds that trusted in Chinese construction.

The blow is systemic. For decades, local governments financed schools, roads and hospitals by selling land to developers: real estate growth was the very basis of public finances. Today, this source has dried up and municipal balance sheets are in crisis, with the risk of cuts in services. The fall in house prices has eroded the wealth of urban families: Homes are worth less and consumers are spending less and saving more, further slowing the domestic economy, writes VoxNews.

The stock of unsold housing is more than double the historical average: new construction has fallen by a fifth in the first seven months of 2025 alone. Prices continue to fall, reducing buyer confidence and making it harder for builders to cover costs.

Other giants, such as Country Garden or China South City, have also entered the danger zone: between restructuring attempts and liquidation orders, the possibility of following Evergrande's fate is real. The result: a broken economic chain and a sector that has gone from being a growth engine to a burden/ VoxNews

 


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