BEIJING (SCMP): Property tycoon Pan Shiyi issued a rare critique of China’s real estate sector, describing its development model as a “Ponzi scheme” and urging the industry to restore integrity and better protect homebuyers, just days after a fraud trial saw a guilty plea from the founder of China Evergrande – the US$300 billion debt juggernaut whose 2021 collapse triggered a systemic property meltdown.
Writing from the United States on Thursday via his personal WeChat account, Pan reflected on the trajectory of China’s property market over the past three decades, saying the sector had “all but collapsed”.
He estimated losses at trillions of yuan and claimed that the roots of the crisis lie in a “Ponzi-like” model, referring to a form of fraud that pays existing investors with funds collected from new investors.
“For the property market to recover, confidence is the most important factor,” he wrote. “When dealing with legacy issues, homebuyers must come first.
“If buyers pay for homes but fail to receive them, confidence in the market will be completely lost, and recovery will be impossible.”
Pan, who rose from modest beginnings to co-found SOHO China – one of the country’s leading commercial property developers – in the 1990s, became a prominent figure during China’s property boom. He has resided in the US since 2022, when the sector was in the midst of a crisis and Beijing was tightening policies to crack down on developers’ high reliance on debt for growth.
His comments came after Hui Ka-yan, founder of China Evergrande, confessed in a trial held on Monday and Tuesday to charges including embezzlement of corporate assets and corporate bribery.
Hui, also known in mainland China as Xu Jiayin, was once one of the most emblematic tycoons of China’s property boom, but Evergrande collapsed after its debt-driven growth model unravelled.
The crisis left projects stalled and homebuyers facing delays, unfinished homes and mortgage risks, while the developer amassed around US$300 billion in liabilities, making it one of the world’s most indebted property firms.
Official data released on Thursday by the National Bureau of Statistics (NBS) underscored the sector’s continued weakness. Real estate investment fell 11.2 per cent, year on year, in the first quarter, while new home sales dropped 16.7 per cent. Mortgage lending declined 34.6 per cent, and domestic loans to developers fell 23.7 per cent, the NBS said.
The country’s first-tier home prices edged up 0.2 per cent in March, rising after nine months of losses and no change in February, according to the NBS. But analysts said it was too soon to declare the property market stable without sustained improvement in homebuying demand.
“The sector has been in decline for so long that [actions] cannot be delayed any further,” Pan wrote. “At its core, the industry must rebuild integrity – confidence is built on trust, and we hope that day comes soon.”
Pan’s article, which criticised the sector’s underlying model, has since been scrubbed from mainland Chinese platforms, including his WeChat account and reposts by multiple media outlets.
“What is truly fatal is when an industry departs from integrity and builds its model on ever-increasing leverage, continuous refinancing and finding new buyers to take over,” he wrote. “More dangerously, some deliberately create illusions to draw more participants into the system.”
“Meanwhile, buyers believe prices will always rise – purchasing not to live, but to profit from resale,” he said. “Everyone thinks they can leave the game before it ends, but in reality, only a few ever do.” — SOUTH CHINA MORNING POST