China's two major real estate developers, Evergrande and Country Garden, have defaulted on their debts. But the issues in China's real estate market have much deeper roots.
Desperate real estate developers in China have resorted to gifts such as new cars, free parking, phones and other consumer goods to attract home buyers and boost sagging sales.
These incentives are just the tip of the iceberg in a crisis that involves hundreds of billions of dollars in home construction debt, trillions of dollars in local government debt, and at least a billion empty apartments.
But this was not always the case. Since China's economic liberalization in the 1970s and housing reforms in the late 1980s, locals have flocked to real estate as the investment vehicle of choice over alternatives such as the stock market.
The real estate and construction boom has helped fuel economic growth in China and the world for thirty years. By some estimates, real estate in China was worth $60 trillion at its peak, making it the largest asset class in the world.
Developers love Evergrande And Country Park She became extremely rich in the process.
As real estate values rise and Chinese households pile up more debt, Beijing has tried to cool its housing market and rein in risky business behavior. Chinese consumers have been spooked by buying real estate.
But the country's real estate crisis has deeper roots than speculation and uncontrollable debt. Watch the video to learn how the real estate bubble burst in China.
