Former Japanese Ambassador to China: China's economic crisis is unprecedented, and the collapse of the housing market affects the entire population and the lifeblood of the nation.

Has China's era of rapid economic growth lasting for forty years officially come to an end? Under the multiple pressures of a real estate bubble burst, local government debts piling up, and the escalating China-U.S. trade war, China is facing the most severe economic challenges since the reform and opening up. In the latest "Bungeishunju Plus Formula" interview program, host Muraishi Gen invites two China experts; former ambassador to China, Chui Hideo ( and visiting researcher at the Japan Institute of International Affairs, China observer Tsukami Toshiya ) to deeply explore the roots and future of China's economic predicament.

Real estate in China accounts for 30% of the overall GDP.

At the beginning of the interview, Chui Hsiu-fu pointed out that China's real estate has long been regarded as an investment target that "only rises and never falls." Many people believe that buying a home is not only a housing need but also a guarantee of wealth accumulation. However, starting in 2022, this belief was shattered by reality, as the Chinese real estate giant "Evergrande Group," which is burdened with nearly 50 trillion yen in debt, was officially delisted this August, symbolizing the complete collapse of the real estate bubble.

Tsui Siu-fu believes that today's China has similarities with Japan's bubble economy in the 1990s, but the situation in China is more complex. The real estate market in China is highly reliant on the guidance of the state and the party, with local governments using land sales as one of their main sources of revenue. He stated that the bursting of the real estate bubble is not just a single industry issue, but a major problem that affects the entire economic lifeline of the country.

According to Junya Tsushita's analysis, real estate and its related industries account for about 30% of China's GDP. The collapse of the real estate market not only severely impacts the overall asset prices of the country but also dampens overall consumer and investment willingness. He pointed out that many local officials own four to five apartments, and now that housing prices have plummeted by 30%, these assets are nearly impossible to liquidate, directly affecting household finances and consumption.

The fiscal debt crisis of local governments is more terrifying than the collapse of the housing market.

Jin further pointed out that real estate is not the only bubble. Over the past decade, Chinese local governments have made significant investments in infrastructure, accumulating astonishing hidden debt. He warned that the infrastructure bubble of local governments may be more serious than the real estate issue, as declining revenues and ballooning debts are causing some regions to be unable to fulfill basic administrative functions.

Although the financial situation of the Chinese central government appears to be good on paper, the resource allocation and trust deficit between the central and local governments exacerbate the crisis. Chui Xiufu stated that the central government's distrust of local governments has delayed the decentralization of resources. They are concerned that once restrictions are loosened, local governments will engage in reckless investments again.

The failure of the "houses are for living, not for speculation" policy and the difficulties of Chinese-style economic management.

Chui Xiufu reviewed the policy proposed by the high-level officials of the Communist Party of China in 2017, which stated that "houses are for living in, not for speculation." He pointed out that although this statement sounds correct and good in intention, it lacks supporting measures in practical operation, leading to a complete collapse of market confidence. He added that once asset values cannot be realized, people will stop consuming, and the economy will naturally enter a long-term downturn. Jinshang further added that China's total housing supply is severely excessive, with statistics showing that there are currently 3 billion habitable houses in China. The structural issue of oversupply means that the market can no longer recover through traditional means.

The China-U.S. trade war continues to escalate: China's reliance on foreign trade has become a weakness.

Trump is the focal figure as Sino-U.S. trade friction intensifies again. Jinshang pointed out that the United States was once China's largest export market, with about 15% of export value flowing to the U.S., so the U.S. raising tariffs will directly impact the Chinese economy.

However, China remains extremely cautious in its response. Tsunashige believes that China hopes to re-establish an agreement with the United States on one hand to buy time; on the other hand, its domestic economy is weak, which limits its capacity to increase imports.

Both experts are not very optimistic about the future direction of the Chinese economy. Jin Shang emphasized that if the bubble burst is delayed repeatedly, bad debts and debt issues will worsen. He suggested that the central government should restart the resource redistribution mechanism to assist localities in overcoming difficulties.

However, Chui Siu-fu stated that what China needs is not just policy adjustments, but deep reforms at the institutional level. He emphasized that unless the central government is determined to reform the land, fiscal, and real estate systems, the economy will remain sluggish for a long time.

This talk show hosted by Bungeishunju not only reveals the surface of China's current economic predicament but also analyzes the underlying causes. Whether it's the real estate bubble, local government debt, or reliance on exports to the U.S., the biggest risk is that China chooses to delay, and every minute of postponement will make the cost in the future even heavier.

Note 1: Chuijinf

The former Japanese ambassador to China was born in Osaka Prefecture in 1961. After graduating from the Faculty of Law at Kyoto University, he entered the Ministry of Foreign Affairs in 1985 and was a member of the Chinese language training group (Chinese school), dedicating himself to affairs related to China and Taiwan. He has held multiple positions, including Deputy Director-General of the Minister's Secretariat, and was appointed the 16th Japanese Ambassador Extraordinary and Plenipotentiary to China in 2020, retiring in December 2023.

Note 2: Junya Tsunoshita

Visiting Researcher at the Japan Institute of International Affairs, Researcher on Modern China

Born in Ehime Prefecture in 1957. After graduating from the Faculty of Law at the University of Tokyo, he entered the Ministry of International Trade and Industry (now the Ministry of Economy, Trade and Industry) in 1980. He has held positions such as Counselor at the Japanese Embassy in China and Director of the Northeast Asia Division of the Trade Policy Bureau, and has been in his current position since 2018. In 2003, he received the Suntory Prize for Social Sciences and Humanities for his work "China's Rise: What Should Japan Do?" (Nikkei Publishing).

This article, Former Japanese Ambassador to China: China's economic crisis is unprecedented, the housing market is collapsing comprehensively affecting the entire population and the lifeline of the country, first appeared on Chain News ABMedia.