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Property crunch will be followed by lasting decline

The root of Evergrande’s troubles – and those of other highly-leveraged developers – is that residential property demand in China is entering an era of sustained decline. Relaxation of regulatory controls on the sector wouldn’t change this fundamental constraint. Construction, a key engine of China’s growth and commodity demand, will slow substantially over the next few years, whether or not the economy escapes the current crunch unscathed.

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