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China’s gargantuan economy has come out of three years of “zero covid” policies not with a roar, as many inside and outside the country had hoped, but with a whimper.

The economy will be lucky to hit the government’s 5 percent growth target this year, analysts say, and it is a far cry from the 8 percent of a decade ago.

Now, exports, investment, factory output and retail sales have all slowed. Consumer spending is so weak that, while many other parts of the world are grappling with a cost of living crisis, prices are falling in China. Jobless numbers are so bad the government has simply stopped reporting the youth unemployment rate. The property sector, which accounts for about a quarter of economic activity and two-thirds of household wealth, is in crisis.

The extent of the crisis was made clear Thursday when Evergrande Group, one of China’s largest property developers until it collapsed in 2021, filed for bankruptcy protection in New York.

This came just days after Country Garden, one of China’s largest private real estate developers, revealed it owes more than $200 billion and is on the brink of default. Dozens of other developers have been unable to pay their bills.

Yet the authorities in Beijing seem reluctant to respond to calls, in China and abroad, for bold, decisive action to shore up the property market — and avoid contagion that would be felt across the global economy.

“We must maintain historic patience and insist on making steady, step-by-step progress,” China’s powerful leader, Xi Jinping, said in a speech that was delivered in February but not reported in state media until this week, as the bad economic news worsened.

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The government has taken small steps to boost demand — trimming key interest rates and making it easier for more people to buy homes — but Beijing has so far held off from taking large-scale actions. Faith in the market remains shattered, tanking already low confidence among consumers at a time when the world’s second largest economy needs spending to stave off a slowdown.

The government cannot afford for developers to continue to default, said Alicia García Herrero, chief Asia-Pacific economist at investment bank Natixis.

“They need a direct intervention in the property market,” she said. “Despite the regulatory measures they’ve taken, people are still saying they’ll wait to buy a home, because they don’t think it’s over.”

Although the Evergrande collapse in 2021 was a bigger shock than the potential default of Country Garden, the timing is worse because the economy is so much weaker.

“With the economy in worse shape now than it was then, even a smaller hit could be destabilizing,” Julian Evans-Pritchard, the top China analyst at Capital Economics, warned in a note to clients this week.

A sustained decline in home sales would spell disaster for cash-strapped local governments, which rely on land auctions to property developers for income, and the $9 trillion in debts they hold.

Some cities and provinces are already on the brink of default after three years of pandemic spending and reduced revenue — plus decades of taking out huge loans to finance construction.

If local governments were unable to service their debts, the contagion could spread even more widely.

President Biden last week said the Chinese economy, with its high unemployment rate and slowing growth, was a “ticking time bomb.”

“They have got some problems. That’s not good, because when bad folks have problems, they do bad things,” Biden said at a political fundraiser.

Too many apartments, not enough buyers

The crisis in China’s real estate sector has been brewing for years.

Buying real estate became one of the main ways for China’s growing middle class to accumulate wealth and created an expectation that land and home values would continually increase.

Because of this, developers required people to pay for a home in full before it had even been built, lending the system a “Ponzi-type element,” said Logan Wright, director of China markets research at Rhodium Group.

Much like investors in local government bonds, home buyers took it on faith that they were buying into a safe — and profitable — moneymaking plan. The crisis has revealed just how risky those bets actually were.

“It’s still underappreciated how the property crisis and the local government debt crisis are essentially the same issue,” said Wright.

China’s falling prices are a more profound problem than U.S. inflation

In 2020, Xi moved to crack down on excessive borrowing in the sector, straining developers who in most cases relied on buyers prepaying in full.

Real estate giants like Evergrande and Country Garden specialized in selling the dream of homeownership to people in China’s smaller cities. The majority of the company’s sales, and its land reserved for upcoming development, was concentrated in third- and fourth-tier cities.

But in many of these places, housing supply has outpaced demand. Smaller cities often can’t compete with major metropolises to attract residents and many are home to “ghost cities” of empty apartment blocks.

Growing increasingly concerned that a bubble was forming, the Communist Party has for several years tried to clamp down on overinvestment. But the Politburo last month removed the mantra “housing is for living, not for speculation” from its documentation, suggesting that it was trying to encourage investment again.

Years of stalled economic activity under the harsh zero-covid restrictions only made it harder for the developers to fulfill their commitments. As apartments went unbuilt, fed up home buyers across China refused to make further payments at hundreds of properties last year, according to one crowdsourced list.

In Penglai, on the coast of China’s Shandong province, work on a block of luxury apartment towers in a Country Garden development ground to a halt last week. In a now-familiar scene, blue notices appeared on the walls: The property developer, Country Garden, was no longer paying its bills.

The construction company refused to keep building. Hundreds of home buyers were outraged. They’d already paid upward of $200,000 and had been expecting to move in by the end of June, said a real estate agent in Penglai who gave only his surname, Liu, to avoid attracting the ire of authorities.

Instead, the home buyers were met with “delays, false advertising and corner cutting,” said Liu — and were left wondering where their money had gone.

Is the era of government support over?

While analysts are quick to point out this is not a “Lehman moment” for China, they are concerned that the authorities will misjudge how and when to step in to prevent the crisis from spiraling.

The housing market has long been heavily guided by government policy. Property developers and home buyers alike have come to expect strong support measures to halt downturns.

But that stimulus may never arrive. Policymakers in Beijing have so far refrained from state-funded bailouts of these property companies, opting instead for more modest and indirect support, Evans-Pritchard said.

The government has let banks roll over loans to property developers and attempted to boost sales by reducing requirements for down payments and improving mortgage rates. Some cities are subsidizing home purchases and have suspended restrictions on buying a second or third home.

Many argue these piecemeal measure won’t be enough.

“This approach clearly isn’t working as well as officials had hoped,” Evans-Pritchard wrote. “They may conclude that, with the economy in the doldrums, they have little choice but to change tack and deploy government funds to prevent another wave of private developer failures.”

For now, the government priority should be managing the slowdown.

“In the long run, the market is not going to come back to its golden age like 10 years ago, that age has simply gone,” said Shitong Qiao, a Duke University law professor. “The Chinese government is not going to be truly committed to revive the real estate market — the ideal is to have a soft landing.”

Christian Shepherd in Taipei, Lillian Yang in Denmark and Theodora Yu in Hong Kong contributed to this report.

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