China’s economy was the first to emerge from the effects of the financial crisis, registering remarkable growth in contrast to its major trading partners. However, its dependence on and integration with the global economy meant that China’s economy did not escape the effects of the crisis. This paper set out to investigate how the global financial crisis affected China’s economy and more specifically the real estate sector. The history of China’s real estate sector is relatively short with private property ownership only allowed in the early 80s, while the mortgage finance industry only took off in the late 90s. However, the real estate sector in China went on to play a critical role in the economy’s ability to maintain growth in the midst of a severe financial crisis.
This research study began by investigating the impact of the global financial crisis on China’s real economy, especially its GDP, and its financial markets. In addition, an investigation was conducted into how these economic aspects, in turn, affected the real estate sector by assessing the relationship between supply of housing and demand for housing during and after 2007/2008. A mixed method approach was used to determine how the crisis affected the economy and the real estate sector, as well as how government interventions sought to offset these effects. It was found that the Chinese government sought to enhance economic growth by reducing domestic government borrowing and stimulating domestic lending, of which the real estate sector was a major beneficiary. However, these effects are beginning to wear off as housing demand falls. Recommendations on how a potential crisis in the real estate sector can be avoided are also provided.