Construction in Shandong province, China, October 2015
Stringer / Reuters

In March 2021, analysts projected that revenues at Evergrande Group, China’s second-largest real estate developer, would grow by 70 percent this year. In September, however, the property behemoth—with some $300 billion in outstanding debt—missed $131 million in interest payments. When Beijing didn’t come to its rescue, shocked investors were caught flatfooted.

Frothy real estate markets and aggressive corporate borrowing have driven much of China’s growth over the past two decades. Real estate and construction now account for 29 percent of the economy—twice the levels prevailing in developed countries. Other Chinese sectors depend heavily on property values; nearly one-third of

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