Real estate investment in China is a big business, and one of the biggest investors is a company called Evergrande. The problem is that Evergrande has quite a bit of debt and is rather close to defaulting. The company certainly doesn’t control a majority of the Chinese real estate market, but it’s significant enough to put a dent in consumer confidence if it goes under.
This is merely a symptom of the actual problem with China’s real estate investment market. The truth is that China’s population has been falling dramatically in recent years, but investors haven’t scaled back their investments. This has led to a significant overabundance of supply, as well as compounding investor debt.
Why is this important for the US? Well, a large number of our foreign investors are from China, especially in the commercial sector but also in residential. Chinese investment in US real estate has been slowing already, but it’s high enough that a market crash in China would definitely have aftershocks in the US real estate market. Fortunately, because our market actually has the opposite problem as China — too little supply — investors bailing out and selling could just open up more opportunities for buyers.