The “three red lines” Policy and Debt Crisis of Real Estate Companies in China

DOI

10.2991/978-94-6463-706-9_15How to use a DOI?

Keywords

“the three red lines”; debt crisis; systematic risk

Abstract

Since 2020, the biggest risk in China’s financial system has come from the real estate industry. This article explores how the “three red lines” policy on real estate financing affects the debt repayment capacity and debt risks of real estate companies, leading to systemic shocks in the economic system. First, through literature review, it summarizes the high-turnover business model of real estate companies, which is the background of the “three red lines” policy. Secondly, through data from banks and enterprises’ balance sheet, it finds that the “three red lines” policy has indeed tightened financing for real estate companies, increasing the non-performing loan rate and the amount of defaults in the real estate sector. The debt risk in real estate transmits to the real economy through financial intermediaries, while also negatively affecting consumption and investment by enterprises and residents through the wealth effect. The analysis indicates that too rapid a tightening of financing restrictions may impact normal business operations and lead to a debt crisis.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Haoyu Ye
PY  - 2025
DA  - 2025/05/07
TI  - The “three red lines” Policy and Debt Crisis of Real Estate Companies in China
BT  - Proceedings of the 2024 2th International Conference on Economic Management, Financial Innovation and Public Service (EMFIPS 2024)
PB  - Atlantis Press
SP  - 151
EP  - 162
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-706-9_15
DO  - 10.2991/978-94-6463-706-9_15
ID  - Ye2025
ER  -