Pan Shiyi, the founder of SOHO China and one of China’s most recognizable property developers, has published a long public essay describing the country’s real estate sector as a Ponzi scheme. Writing on Weibo, a state-controlled social media platform, Pan traces the industry’s structural breakdown to policy decisions dating back to the late 1990s and argues that systemic dishonesty turned a nationwide housing boom into a multi-trillion-yuan crisis.
For a developer who spent three decades at the center of that system, and who sold more than 30 billion yuan (about $4.1 billion) in assets before the downturn, the account carries unusual weight.
Official data shows continued decline across the sector
The scale of the downturn is reflected in official data. China’s National Bureau of Statistics reported that real estate development investment in the first quarter of 2026 totaled 1.772 trillion yuan ($244 billion), down 11.2 percent from a year earlier. Sales of newly built commercial housing fell 16.7 percent over the same period.
Data from the China Index Academy, a widely cited property research firm, shows that average resale housing prices across China’s 100 largest cities continued to fall as of March 2026, extending a decline that has lasted nearly four years.
Industry observers generally point to two parallel challenges: managing the debt accumulated during years of rapid expansion and restoring confidence among homebuyers. Pan’s essay focuses primarily on how responsibility for the crisis developed.
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Policy shifts turned housing into a market commodity
Pan traces the origins of the current system to the late 1990s. Prior to that period, urban housing in China was distributed through state employers, known as work units. In 1998, the government began allowing individuals to buy and sell homes, marking what Pan describes as a turning point.
Under the new framework, housing demand became a driver of construction and economic growth. Banks expanded mortgage lending, shifting from developer-focused financing to direct loans for homebuyers. Initially, down payments were set at 50 percent, limiting leverage.
Over time, those requirements were reduced. Lower thresholds expanded the pool of buyers and supported continued price increases. Pan describes later practices in which some buyers were able to obtain mortgages with minimal or no down payment. He recalls opposing such proposals during a state television discussion, arguing that eliminating buyer equity would significantly increase risk. According to Pan, those remarks were not included in the broadcast.
Land accumulation became the central measure of success
Pan identifies a second structural shift in how developers were evaluated. The concept of the “land bank,” referring to the amount of undeveloped land a company controlled, became a primary indicator of market standing. Larger land reserves made it easier for developers to raise capital through stock listings and debt issuance.
This system aligned the interests of developers and local governments. Developers needed land to sustain expansion and financing. Local governments, operating within a fiscal structure that limited tax revenue, relied heavily on land sales as a source of income. Under China’s land ownership system, the state retains ownership while granting usage rights for fixed periods, typically 70 years for residential property.
Local authorities controlled access to these rights and auctioned them to developers. The result was a system in which land acquisition, rather than construction quality or long-term sustainability, became the central focus of the industry.
Four groups formed a system dependent on continued expansion
Pan describes a structure involving developers, local governments, homebuyers, and banks.
Developers relied on proceeds from new sales to cover existing obligations. Local governments depended on land sales to fund public spending. Homebuyers treated property as a primary savings vehicle, based on expectations shaped by years of rising prices. Banks provided financing across all parts of the system, including developer loans, mortgages, and investment products linked to real estate.
The system functioned as long as prices continued to rise and new participants entered the market. If any one of these elements slowed or stopped, financing pressures would quickly emerge. Pan writes that the sector appeared stable on the surface but depended heavily on continued expansion.
Pan describes dishonesty as a defining feature of the system
In his account, Pan distinguishes between business failure caused by miscalculation and failure linked to systemic misrepresentation.
He argues that, over time, parts of the property sector became dependent not on underlying cash flows but on expectations tied to future transactions. Continued participation by buyers and lenders reinforced those expectations.
Pan writes that the interaction between financing structures, local government incentives, and market behavior contributed to a system in which risks accumulated across multiple sectors, including banking and household finances.
A developer who exited the market before the downturn
Pan’s account is accompanied by his own career trajectory. Born in 1963 in Gansu province, he co-founded SOHO China with his wife Zhang Xin in 1995 and developed a portfolio of commercial properties in Beijing and Shanghai.
Beginning in 2014, he and his company sold a series of major assets. By the time the market slowdown became widely visible, those transactions had generated more than 30 billion yuan ($4.1 billion). A plan to privatize SOHO China did not proceed in 2022, and Pan and Zhang later stepped back from management roles.
In March 2026, Pan purchased five properties on Manhattan’s Upper East Side for $62.5 million. He and his wife are now based in New York.
Restoring confidence may depend on how losses are handled
Pan concludes by addressing the unresolved consequences of the downturn, including unfinished housing projects, developer defaults, and disputes involving homebuyers who paid in advance for properties that have not been delivered.
He writes that restoring confidence in the housing market will depend on how these issues are addressed, particularly in cases involving individual buyers. In past restructurings, repayment priorities have often reflected institutional relationships among creditors. Pan argues that future handling of such cases will play a role in determining whether market trust can be rebuilt.
