Most chinese are storing wealth in real estate its the prime investment vehicle. People in china have been speculating on properties for decades. The chinese government realized a bubble was forming because house builders started using crazy leverage. The fact this crazy bubble formed has shown the regulators were in fact asleep.

Regulators caught on since early 2010s, they were just soft because hard messing with wealth.

Before 3RL, RE bubble was being addressed since 2010s, TLDR is policies led to domestic construction slump in 2012-2017 - where indicators like floor space completion and construction employment peaked. ~2017 crack down on shadow banking which drove developers + local gov to increase presales, turning it into a financial instrument to keep the taps going. Then hard 3RL in 2020.

Could have probably smashed skulls harder, sooner, but they've been regulating for 10+ years, developers kept finding loopholes thinking central gov would be soft, until central gov wasn't.

See:

https://www.ceicdata.com/datapage/charts/o_china_cn-floor-sp...

At minimum getting floor space completion to peak in 2014 = mitigated bubble.

E: IMO also important to note 3RL happened AFTER 12TH & 13th 5YR PLAN that build out PRC renewable manufacturing. Reason why 3RL is feasible was it became possible to shift construction to renewable rollout to keep jobs and gdp, minus RE speculation, i.e. why PRC can grow at ~5% instead of 5% + 3% RE speculation. RE was never 30% economy, about 15% + 15% in construction and downstream industries. The 15% RE growth got cut down, but other 15% shifted to growing renewable infra.

Western coverage on this is just terrible.

I think a lot of folks who were dismayed by the 2008 bailouts during the GFC would have a lot of sympathy and respect for whats going on. China didn't bail out, they let them burn.

The deflationary conditions are the next challenge and I'm very interested to see how they are combatted. It's interesting that Xi has come out strongly against Abenomics, and direct cash transfers, arguing that they'd distort things and "breed laziness".

Obviously this is a very unconventional view point, but looking at the financial shenanigans that have happened in the West and Japan over the last couple decades it's hard to argue in favor of the conventional methods.

Big issue is neither approach really increases the velocity of money, and just leads to it ending up in savings and bloating balance sheets. You've got to get the cash moving.

E: I do ponder how much of the deflation actually is an "efficiency dividend" due to the mass adoption of renewables and electrification. Saul Griffith (one of the folks behind the inflation reduction act) is working on a macroeconomic analysis that suggests renewable energy is inherently deflationary. Solar panels cost less as time goes forward but oil always costs more (due to getting harder and harder to extract).

Trend recentlyis producer price index PPI has been falling (i.e. inputs cheaper). Core CPI rising (i.e. minus food+energy volatility, really deflating pork prices from overproduction recovering from african swine fever). IMO proxy indicator that cheap power is driving efficiency divident. Western reporting last couple years fixated on porkflation than deflation due to pork deflation (big part of CPI basket) because... well western media.

My intuition is also that PRC deflation = PRC producer simply better at cheaper inputs and value engineering products. A 10K USD domestic EV today is significantly better than a 10k USD domestic IC from 5 years ago. PRC manufacturing very good at Model T-ing everything. And it's the "correct" model since PRC is large income disparity society. Common prosperity means driving quality/costs down so the 5000k USD per capita in tier 3_ cities have something reasonable to buy. And also makes migrating/sustaining to those cities viable because T1s/T2s are full. It's why we see stats like aggregate sales during major events (11/11) or travel going up, but per capita spend down. Market is creating products forbottom quantiles who are price sensitive to consume. Common prosperity is giving T3+ cities a taste of T1/T2. Get's obfuscated by western reporting because their source in T1 cities are buying less Prada handbags because they have to shut down one of their 3 hotpot restaurants. Also just general PRC branding improving in popularity and domestic blends tend to be cost-concious, this gets labelled as consumption downgrading (and some of it is), but a lot of it is also PRC value-driven products are increasingly competitive with imports. Enough to drive patriotic purchasing. Bonus this means very cost-competitive goods for exports and displacing (western) incumbants on increasingly higher value sectors.

Then add government driven consumption, i.e. vouchers for cars, appliances, tourism, industrial upgrades. Underdeveloped safety net = people will have propensity to save. So more prudent for gov to pull targetted consumption lever, IIRC accounting for gov social transfers on top of household consumption, PRC consumption around OECD average. They can consume more, but not as prolific as Americans unless CCP gets more sectors to extract service rent. Which I don't think they want to, at least not as much as US - crippling education debt not good if you want to maximize broad talent development. The other generic suggestion is improve investment market / financialization, and there's some efforts to. But to be blunt, too much of PRC poor are undereducated and vunerable to... not sound investment. IMO recipe for social disaster when grandma gambles away nest egg on stocks because mass speculation / herd mentality / scams / superstition . AKA shenanigans. So really just leaves household saving what they need, buying what they can afford, and gov boosting consumption via levers, and indy policy stretching more consumption per rmb by making goods better/cheaper.

Three red lines was definitely reactionary and perhaps late, but better late than never. I'd consider any form of intervention/deleveraging prior to a full blown meltdown evidence of being "not asleep". It's very hard to pass laws that negatively impact peoples life savings.