Hengda's Crisis and China's Real Estate Market: A Deep Dive
This article analyzes the ongoing Hengda crisis and the broader trends in China's real estate market, based on recent news and expert opinions. We'll explore Hengda's debt issues, the overall decline in property sales, and potential solutions to the current challenges.
Hengda's Financial Woes Intensify
Hengda Group is once again facing significant financial scrutiny. A letter posted on Hengda Finance's official account called for Xu Jiayin, the chairman, to repay debts. This event highlighted the severity of Hengda's financial troubles, causing widespread concern and prompting media attention.
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The Weibo account, certified by Hengda Financial Wealth Management Shenzhen Yexing Company, had been inactive since 2018, making the sudden post even more striking.
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This incident reveals potential internal management issues and a possible collapse of Hengda's wealth fund chain. It also suggests employees' dissatisfaction with Xu Jiayin's handling of the crisis.
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Hengda Wealth, once a prominent financing arm of Hengda Group, is now struggling to address its financial dilemmas, leaving investors in a precarious situation.
Broader Real Estate Market Decline
Beyond Hengda's specific issues, China's real estate market is experiencing a slowdown. Data from the Central Research Institute indicates a decline in sales and prices.
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Total sales of the top 100 houses in June 2025 decreased by 11.8% compared to the previous year, accelerating the decline observed in previous months.
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House prices and sales for the top 100 houses fell by 18.5% in June, further indicating a market downturn.
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This trend suggests a continued period of fluctuation and adjustment in the real estate sector, with potential segmentation among cities in the coming years.
Regional Disparities and Policy Interventions
While some major cities like Beijing and Shanghai are showing resilience, other regions are facing significant challenges. The government is implementing policies to stabilize the market.
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While some high-end projects in Shanghai and Beijing are experiencing strong sales, the overall market is slowing down, suggesting that other regions are struggling.
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Many local governments have introduced policies to stabilize the market, with approximately 170 provinces and cities implementing over 340 measures in the first half of 2025.
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These policies focus on removing inventory, expanding demand, and developing new models and risk mitigation strategies.
Proposed Solutions and Legal Recourse
Experts are proposing solutions to address the real estate crisis, including government intervention and legal pathways for distressed homeowners.
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Economist Li Daokui suggests the government issue special national debt to buy back unsold houses and use them for public housing, thus resolving developers' financial problems and providing housing for foreign workers.
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Courts in Lianyun Port and Zhuhai have ruled in favor of homeowners who purchased unfinished properties, allowing them to terminate mortgage contracts and seek refunds from developers, shifting the burden of the loan onto the developer.
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These legal decisions offer a potential path for homeowners to mitigate losses when developers fail to deliver promised properties.
Challenges and Considerations
Despite potential solutions, challenges remain in stabilizing the real estate market and addressing the underlying issues.
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The concentration of debt on individual homeowners ("leeks") is unsustainable, and solutions must address this imbalance through subsidies, price reductions, or income improvements.
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Government intervention, while potentially helpful, may simply shift the debt burden and delay the inevitable market correction.
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The long-term health of the real estate market depends on addressing fundamental issues of affordability and financial risk, rather than simply shifting liabilities.
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There is concern the recent court rulings offer limited compensation, addressing the expansion of the loss, but not providing full refunds for initial payments.
Conclusion
The Hengda crisis and the broader downturn in China's real estate market present significant challenges. Addressing these issues requires a multi-faceted approach, including government intervention, legal recourse for homeowners, and a fundamental shift towards a more sustainable and equitable housing market. The success of these efforts will be crucial for maintaining economic stability and ensuring the well-being of countless families.