1 SPP work report contains details that hint at how Beijing wants to fix the property sector crisis
2025 SPP work report
March 8
Ying Yong, procurator-general of the Supreme People’s Procuratorate, delivered his work report at the Two Sessions. His report disclosed information on actions targeting illegal fundraising cases:
- The procuratorial authorities prosecuted 25,000 people for financial fraud and crimes disrupting financial management order.
- The procuratorial authorities guided local procuratorates in Guangdong, Beijing, and other regions to review and prosecute 42 individuals in the “Evergrande” case and 49 individuals in the “Zhongzhi” case.
- The procuratorial authorities prosecuted 825 individuals for securities-related crimes such as financial fraud and insider trading.
- The procuratorial authorities prosecuted 3,032 individuals for money laundering crimes, including using virtual currencies to transfer criminal proceeds.
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The procuratorial authorities prosecuted fewer financial crimes in 2024 than in 2023 in comparing the 2024 and 2025 SPP work report. Key changes include:
- Prosecutions for financial fraud and crimes disrupting financial management order decreased by 2,000 people in 2024 compared to 2023 (down 8 percent).
- The 2025 SPP work report did not provide data on prosecutions for fundraising fraud and illegal absorption of public deposits, but the 2024 report said 18,000 people were prosecuted for such crimes.
- Prosecutions for securities-related crimes increased by 479 people in 2024 compared to 2023 (up 58 percent).
- Prosecutions for money laundering crimes increased by 61 people in 2024 compared to 2023 (up 2 percent).
January property data
1. On Feb. 19, the PRC National Bureau of Statistics released the sales prices of commercial residential housing in 70 major Chinese cities.
New housing
- Month-on-month changes: Prices in first-tier cities increased slightly by 0.1 percent, prices in second-tier cities rebounded up 0.1 percent, and prices in third-tier cities declined by 0.2 percent.
- Year-on-year changes: Price declines in first-tier cities narrowed (down 3.4 percent), while price drops in second-tier (down 5.0 percent) and third-tier cities (down 6.0 percent) eased.
Second-hand housing
- Month-on-month changes: Prices in first-tier cities increased slightly by 0.1 percent, while declines in second-tier (down 0.3 percent) and third-tier cities (down 0.4 percent) were unchanged from the previous month.
- Year-on-year changes: Prices in first-tier cities declined by 5.6 percent, while the rate of decline narrowed in second-tier (down 7.6 percent) and third-tier cities (down 8.2 percent).
Overall trends
- Prices of new and second-hand homes in first- and second-tier cities continued to decline compared to the same period in 2024, but showed slight growth month-on-month.
- Prices in third-tier cities continued to drop, but the rate of decline did not expand further.
2. China Real Estate Information Corp (CRIC), China’s largest real estate information and consulting service provider, released its top 100 ranking of Chinese real estate companies by sales for the January-February 2025 period.
- Total sales of the top 100 real estate companies for January-February 2025 decreased by 21.2 percent year-on-year to 488.44 billion yuan.
- Breakdown of company type of the top 10 real estate companies during the January-February period:
- January-February 2021: Four state-owned enterprises, two mixed-ownership enterprises, and four private enterprises.
- January-February 2025: Six state-owned enterprises, two mixed-ownership enterprises, and two private enterprises.
- The share of sales of private enterprises among the top 10 real estate companies shrank from 40.1 percent to 13.1 percent.
Our take
1. The 2025 SPP work report’s details about the review and prosecution of the China Evergrande case and the Zhongzhi Group case offer some clues about how the CCP authorities could handle the collapse of large real estate enterprises and financial institutions in the future, as well as provide some insight into the real estate sector’s prospects going forward.
i) During China’s real estate boom, private developers — unlike state-owned enterprises bolstered by financial discipline and superior access to capital — pursued aggressive expansion by relying on a high leverage, high turnover, and high debt business model. Parent companies would aggregate capital from diverse sources (including bank loans, pre-sale revenue, non-standard financing, equity pledges and offshore bond issuances) and channel these funds into aggressive land acquisitions and capital maneuvers via wealth management entities. This model unraveled when the real estate bubble burst in 2021, resulting in debt defaults among several major developers and igniting a cascading wave of defaults across affiliated wealth management firms.
Evergrande and Zhongzhi were two of the biggest companies impacted when the risky business expansion model blew up. According to mainland media reports, the Evergrande case involved illegal fundraising and financial fraud, with total illicit public deposits reaching about 92.1 billion yuan and outstanding principal and interest liabilities peaking at 34 billion yuan. Meanwhile, the Zhongzhi case is suspected to involve the illegal absorption of public deposits, with the involved amount exceeding 420 billion yuan and a scale of insolvency surpassing 460 billion yuan.
ii) The insolvency of highly leveraged property developers has led to a substantial backlog of pre-sold yet unfinished housing projects. To mitigate the risk of social instability and unrest over unfinished homes, the CCP authorities have been compelling developers to fulfill their commitments. To that end, the authorities have been delaying the bankruptcy of large real estate companies and keeping them operational so that they can complete the delivery of unfinished homes.
Progress on this front, however, remains grim. Lu Ting, chief China economist at Nomura Securities, noted in a September 2024 economic forum speech that for firms like Country Garden, the volume of unfinished pre-sold homes and under-construction yet unsold units was 20 times and 10 times, respectively, that of completed but unsold properties. Reinforcing this outlook, Bloomberg reported in August 2024 that the International Monetary Fund estimates the cost to complete China’s outstanding housing deliveries at 5.5 percent of China’s GDP — equivalent to nearly $1 trillion.
iii) The prosecution of China Evergrande and Zhongzhi Group suggests that the CCP authorities have lost patience waiting for private developers and financial institutions to resolve their financial issues and fulfill housing delivery obligations. Instead, the authorities seem to be preparing to have state-owned or government-aligned developers step in to partially resolve the unfinished homes problem and thereby alleviate risks to social and political stability.
Since 2024, Beijing has initiated punitive measures against private developers, including asset seizures targeting executives of defaulting real estate firms and financial institutions, while permitting these entities to pursue debt restructuring and bankruptcy liquidation. By linking the completion of select housing deliveries to these actions, Beijing can pave the way for state-owned or pro-government developers to acquire high-quality assets and land from insolvent firms. Concurrently, the central government may issue special treasury bonds — likely capped at 1 trillion yuan — to finance developers tasked with fulfilling housing obligations.
The CCP authorities could believe that costs to complete and deliver unfinished projects are now significantly lower than before after years of deflation and the falling price of raw materials. For instance:
- In 2024, the average price of cement nationally was 400.66 yuan per ton, down 17.6 percent from 486 per ton in 2021. Market projections indicate a further weakening of cement demand, expected to contract by approximately 5 percent in 2025, with prices poised for additional declines.
- The average annual price of the primary rebar futures contract in 2024 fell to roughly 3,600 yuan per ton, a 25 percent decrease from 4,800 yuan per ton in 2021.
2. If the CCP authorities do go ahead and allow defaulting real estate enterprises and financial institutions to file for bankruptcy, as well as punish the executives of failing companies, this could inadvertently create opportunities for local officials to enrich themselves and further exacerbate China’s real estate crisis.
For instance, local officials could potentially coerce financially struggling but still solvent private developers into bankruptcy. The move would allow local officials and their associates to snap up premium assets at steep discounts, as well as “help” local governments “meet” home delivery obligations (whether or not the obligations are actually met is another story). If this phenomenon becomes passive, China’s real estate market decline will accelerate further and Beijing would have to deal with even bigger social and political destabilization.
2 Beijing immediately steps up political indoctrination after Two Sessions
Post-Two Sessions indoctrination begins
March 12
The Central Leading Group for Party Building convened a meeting to discuss and deploy an educational initiative focused on studying and implementing Xi Jinping’s key speeches and instructions on the “eight-point regulations.” The meeting, which took place a day after the conclusion of the Two Sessions, was chaired by leading group head Cai Qi and saw the group’s deputy head Li Xi deliver remarks.
The meeting noted that per Party Central’s decision, the entire Party would engage in educational activities centered on the implementation of the eight-point regulations from the end of the Two Sessions until July 2025. The meeting added that Xi personally planned and defined the theme of the educational initiative, as well as delivered significant speeches and provided crucial guidance on it.
Meanwhile, the CCP General Office said in a notice outlining the educational initiative that Party members and officials must deeply study and implement Xi’s important speeches and instructions, as well as align their thoughts and actions with the strategic deployments of Party Central.
March 13
The General Office of the Central Military Commission issued a notice requiring the People’s Liberation Army and the People’s Armed Police to thoroughly study the spirit of the 14th National People’s Congress and Xi Jinping’s key address to the PLA and PAP delegation at the Two Sessions.
The notice instructed all military personnel to fully recognize the “hard-won” achievements of the CCP, the nation, and the military in 2024, and attributed the successes to Xi’s leadership (“steering the helm” [“領航掌舵”]) and scientific guidance. The notice further stressed the importance of deeply understanding the “Two Establishes,” strengthening the “four consciousnesses,” adhering to the “four self-confidences,” ensuring the “Two Safeguards,” and implementing the “CMC Chairman Responsibility System.”
The notice added that the education initiative should be integrated into the theoretical study programs of Party committees above the regimen level, political education in military units, and political theory courses in military academies, with the goal of aligning the military’s thoughts and actions with the strategic deployments of Party Central and chairman Xi. Also, the military needs to persistently use “Xi Jinping Thought” to “concentrate the heart and cast the soul” (凝心鑄魂).
March 14
PRC premier Li Qiang chaired the eight plenary meeting of the State Council. The meeting focused on studying and implementing Xi Jinping’s important speeches and the spirit of the Two Sessions, as well as outline the State Council’s key work of 2025.
Li said that the current State Council has positioned itself as the executor and enforcer of Party Central’s decisions and deployments since the start of its tenure. He added that this remains the foundation and defining characteristics of the current State Council.
Li added that the State Council needs to more resolutely and conscientiously implement Xi’s important instructions and Party Central’s strategic deployments going forward. The State Council must act as “decisive executors, proactive problem-solvers, and pragmatic achievers.”
Li further noted that the 2025 government work report, which is based on major policies set by Party Central, has made specific arrangements for this year’s economic and social development work.
Our take
1. The Xi leadership’s almost immediate launching of a political indoctrination campaign after the Two Sessions centered on promoting Xi Jinping’s speeches and the “spirit of the Two Sessions” suggests that Xi could indeed be feeling uneasy about the political situation in the CCP regime. As we previously analyzed, the Xi leadership could be aware of persistent rumors and speculation about his grip on power that have been circulating in overseas Chinese-speaking circles, and could also be feeling the pressure from having to deal with mounting domestic and external crises.
Concurrently, the swift rollout of the “education initiative” also underscores the fact that Xi is still politically strong and has a relatively stable grip on power. Also, Li Qiang’s remark at the eighth plenary session of the State Council about how the body’s primary role is executing and enforcing Party Central’s decisions and deployments is an affirmation of Xi’s current dominance in the regime. The continuation of this trend will further erode the “collective leadership” model and strengthen Xi’s more centralized and personalized model.
2. The Xi leadership’s latest political indoctrination effort is likely intended to ensure that cadres and officials deepen their loyalty towards Xi Jinping and become more conscientious in implementing Beijing’s directives and deployments. On paper, the intensification of indoctrination should translate into better and more effective governance. However, we are highly skeptical that the Xi leadership will get what it wants because Party culture (including “preferring left rather than right,” etc.), bureaucratism, and other serious deficiencies of the CCP authoritarian system cannot be overcome through working within the system.
3. Improving governance aside, the Xi leadership could also be laying the groundwork early for Xi Jinping to take a fourth term at the 21st Party Congress in 2027 through the rollout of the “education initiative” meant to prop up Xi. Party propaganda’s doubling down on Xi’s personal dictatorship and Xi’s non-designation of a successor hint at his long-term political ambition.
Xi’s desire to stay in office despite China’s economic decline and other serious problems plaguing the regime is likely to draw opposition from remnant rival factions in the CCP elite. The rank-and-file members of the Party whose interests have been harmed by Xi are also likely to put up resistance, particularly of the indirect and “passive” sort. Growing tensions and antagonism towards Xi would create more political instability in the PRC and create fertile grounds for the emergence of “Black Swan” events.
