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The Builders of the Real Estate Bubble

An important element in analysing the changes in single-party pluralism in China is the investigation of the struggle between different groups and fractions of the bourgeoisie. The study of key economic sectors can reveal shifts in internal balances and, at the same time, allow us to follow the rise of Chinese imperialism through concrete examples of companies that are projecting themselves onto the world market. One of these key sectors is construction and real estate. This is a vast field, ranging from cement production to energy, transport infrastructure, and housing.

Scrolling through the ranking of the 500 largest Chinese companies, we find 29 construction companies, with $2.4 trillion in assets and 2.8 million employees in total: ten years ago, there were 40 groups. The sector lost 4% of its capital and 5% of its employees in the overall ranking as a result of a twofold dynamic: groups linked to residential construction are declining, mostly giving way to those of Yellow China, while builders of large infrastructure and energy projects are on the rise. Cement and electricity, symbols of the old and the new in China’s industrial restructuring, are now recombining within and along the Silk Road. This dialectic, common to other sectors, also sums up the particular history of Chinese restructuring, which emerged from the infrastructure stimulus of 2008 and was accompanied by the controlled deflation of the real estate bubble. In essence, there is a dynamic produced by several movements in the ranking of large groups.

The real estate crisis

After tripling in size over the course of a decade, the Chinese construction market is now the largest in the world, accounting for one-fifth of all construction investment. The sector is one of the pillars of the national economy, writes the People's Daily. This huge domestic market remains the launch pad for large economic groups to enter the global market, despite the difficulties of recent years. Even before the Chinese real estate crisis, which broke out in 2021, changed the top of the rankings, indicating the first winners and losers, a process of concentration and selection of large and medium-sized groups was underway, due to the end of the housing boom linked to urbanisation. The causes of the real estate crisis can be found in the slowing influx of rural migrants to cities and the decline in new urban construction for the first time.

Chinese statistics show declining employment in construction companies for the first time in 2018, from 55 million to 53 million, reaching 51 million today. Construction machinery is also an indicator of the cycle in the construction industry: installed capacity jumped from 92 gigawatts (GW) in 2000 to almost 300 in 2014, before falling sharply to 230 in 2021 and 170 in 2022.

One of the few data sets (collected since 1985) is the square metres under construction and completed. Until the early 2000s, about half of the space under construction was completed each year. The trend reversed in 2015, with a decline in finished space in absolute terms and, relative to work started, from one-third to one-quarter in 2022. These few data points place the end of the boom around 2015. This phenomenon is more pronounced in the provinces of Blue China than in those of Yellow China. The result is a relative loss of importance for groups linked to residential construction in the coastal area and the entry of Sichuan builders into the top ten groups in the ranking.

Major bankruptcies

Evergrande, the largest Chinese and global real estate company in the pre-Covid years, based in Guangzhou and founded by billionaire Hui Ka Yan (Xu Jiayin in Mandarin Chinese) in 1996, has risen to international prominence. Mainly focused on the housing sector for people with medium-high incomes in the southern provinces of China, Guangdong in particular, its minority shareholders included other billionaires such as Hoi-wan Chan of Hong Kong, Jack Ma of Alibaba, and Li Yonghong, already a partner in real estate investments with Donald Trump. The value of Evergrande’s shares had grown by 470% in 2017, but began to decline the following year, with the slowdown of the entire sector, until it collapsed financially in 2021, making the Chinese real estate crisis official. Hui Ka Yan ended up, ingloriously, in a special Shenzhen detention centre, fined $6.6 million and banned for life from the financial market after it was discovered that Evergrande had inflated earnings and committed securities fraud [Reuters, September 13th 2024].

Another Chinese real estate giant, Country Garden, is fighting to avoid the fate of Evergrande. Founded in 1992 in Guangdong province by Yang Guoqiang, who later transferred his shares to his daughter Yang Huiyan, it is a real estate development company operating in over 1,400 cities, with more than five million customers. In October 2023, Country Garden announced that it was unable to honour its debts contracted outside China.

The other big players in Guangdong

China Poly Group weathered the crisis better: founded in 1992, it originated ten years earlier as Poly Technologies, for the import and export of special and military equipment and technologies and is controlled by the China International Trust and Investment Corporation (CITIC), established by Deng Xiaoping in 1979. Today, it has hundreds of subsidiaries and affiliates. The group’s real estate division is based in Guangzhou, and in 2023 it had a turnover of over $47 billion and more than 56,000 employees.

The story of the Vanke group is unique in that, unlike many state-controlled companies in difficulty that were subsequently privatised, it took the opposite path. Founded in 1984 in Shenzhen, Vanke began its real estate activity at the end of 1988, starting its rise with annual increases of 30-35% until 2015. That year, founder Wang Shi faced a hostile takeover bid that convinced him to bring in Shenzhen Metro Group, a state-controlled railway company, as a shareholder, which acquired a controlling stake in 2017. The group was initially spared from the crisis, but suffered significant losses in 2024.

It remains to be seen whether Chinese real estate companies will be able to get off the roller coaster. The trend of the last decade has been a decline in the importance of the residential sector in the face of the growing role of energy and infrastructure groups which are the main builders of the Silk Road.

THE MAJOR BUILDERS

THE MAJOR BUILDERS revenue employees
China State Construction Engineering 320,431 382,894
China Railway Engineering Group 178,563 314,149
China Railway Construction 160,847 336,433
China Communications Construction 136,671 219,034
PowerChina 97,035 184,567
Pacific Construction Group 76,433 293,125
China Poly Group 73,999 102,834
China Vanke 65,790 131,097
China Energy Engineering Group 57,708 119,182
Greenland Holding Group 50,897 59,970
Susun Construction Group 45,265 141,256
Shanghai Construction Group 43,031 51,272
Guangzhou Municipal Construction Group 42,403 50,608
Shudao Investment Group 35,379 55,878
Shaanxi Construction Engineering Holding 34,061 41,390

Revenue in millions of dollars.

Source: Fortune China 500 [2024 edition].

The outlet of the external projection

China State Construction Engineering is the global leader. The state-owned group, founded in 1957, claims to have built more than 90% of skyscrapers above 300 metres, three-quarters of key airports, three-quarters of satellite launch bases, one-third of urban utility tunnels, half of nuclear power plants. One out of every 25 Chinese people lives in a house built by China State Construction [Construction Digital, January 17th, 2024]. The group controls more than 100 companies and operates in over 100 countries around the world. In 2020, Washington added it to the list of companies linked to the Chinese military and it is therefore currently excluded from US shareholding.

The two other large state-controlled engineering and construction companies are China Railway Construction Company (CRCC), which was featured in the October 2021 issue of Lotta Comunista, [“Dal genio militare alla Via della Seta”], and China Railway Engineering Group. These two companies have designed and built most of China’s rail transport infrastructure and are active in Southeast Asia, Africa, Russia, and Venezuela. We also wrote about China Communications Construction Company (CCCC) in March 2019. PowerChina has held over 50% of the Chinese hydroelectric power plant construction market for the past 60 years. Known for its participation in the construction of the world’s largest hydroelectric power station, the Three Gorges Dam, PowerChina boasts other firsts, such as the Jinsha Dam, the second largest in the world, and the Nile Dam in Sudan, the longest in the world.

“Red dragon fish”

The largest privately owned construction company, Pacific Construction, is also Chinese. It is controlled by Yan Jiehe, born in Jiangsu province in 1960. He studied Chinese literature at Renmin University in Beijing and began working as a teacher. In 1986, he was publicly selected as manager of the Huai’an Yinjiang Construction Engineering cement factory, becoming its president in 1995 and transforming it into the current Pacific Construction. In conjunction with China’s One Belt, One Road initiative, Pacific Construction moved its headquarters to Xinjiang and began expanding overseas to Malaysia, Albania, Montenegro, South Africa, Botswana, and Zimbabwe.

The founder is considered a thinker, as well as an economist and businessman, and has been a guest at Davos, Harvard, Cambridge, Oxford, and so on. In an interview with the Financial Times, Yan Jiehe preferred to paint a different picture: In the sea of the market economy, I am a fortunate and formidable red dragon fish [February 1st, 2015]. That is to say, a businessman in the capitalist world, an aggressive hunter of other freshwater fish – the red dragon fish.

Lotta Comunista, April 2025

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