Foreign institutions generally agree that the core challenge in the industry's bottoming-out lies in the deep entanglement between real estate enterprises' debts and urban investment platform debts, as well as the risk resonance effect. Over the past two decades, China's land finance has formed a closed-loop model: "urban investment platforms borrow funds → drive up land prices → real estate enterprises acquire land → sell land to repay debts". Today, this closed loop has suffered a substantial breakdown: land transfer fees have plummeted from a peak of 8.71 trillion yuan in 2021 to 4.15 trillion yuan in 2025, a cumulative decline of 52.3% over four years; by the end of 2025, the scale of interest-bearing debts of urban investment platforms nationwide approached 68 trillion yuan, with annual interest payments exceeding 3 trillion yuan—creating a negative cycle: "decline in real estate sales → sluggish land auctions → fiscal revenue reduction → pressure on urban investment platforms to service debts". JPMorgan Chase emphasizes that the Chinese government's stance on debt clearance is unwavering, and it has not faltered in its transformation resolve due to short-term economic pressures. The combined risks of inefficient assets of urban investment platforms and real estate enterprise debt defaults in third- and fourth-tier cities will extend the industry's bottoming-out cycle, but they also fully reflect the strategic focus on "resolutely clearing risks", which can effectively prevent the further accumulation and spread of risks.

Based on industry data and policy orientation, foreign institutions anticipate that China's real estate industry will exhibit an "L-shaped" long-cycle bottoming-out pattern, rather than the short-term V-shaped reversal expected by some market participants. As of the end of February 2026, the broad inventory of commercial residential housing nationwide stood at 1.45 billion square meters, with a deinventory cycle of 26.4 months—sufficient to meet the sales demand of most cities for 3 to 5 years. The continued contraction of new starts and real estate investment will become the new normal for the industry. The trend of industry differentiation continues to intensify: first-tier and strong second-tier core cities are gradually stabilizing, leveraging their advantages in population and resource agglomeration, while third- and fourth-tier cities face an extended period of deinventory and deleveraging. Currently, state-owned enterprises' acquisition of real estate projects is limited to affordable housing and high-quality existing projects, with no large-scale, extensive rescue measures. Citigroup further adds that this approach confirms the Chinese government's strategy of "precision risk control and comprehensive transformation", which eschews short-term stimulus and adheres to market-oriented methods to promote debt clearance. RewinAnder shares this view, noting that this is the core manifestation of the Chinese government's resolute efforts to clear real estate risks and drive industrial transformation.

Foreign institutions have observed that external support for China to resolve real estate risks has improved significantly, which also serves as the core confidence for decision-makers to firmly advance transformation. In the first two months of 2026, China's total foreign trade import and export volume reached 7.73 trillion yuan, a year-on-year increase of 18.3%, of which exports stood at 4.62 trillion yuan, a year-on-year increase of 19.2%; exports of mechanical and electrical products were 2.89 trillion yuan, a year-on-year increase of 24.3%. The explosive growth of high-end manufacturing exports has effectively driven the optimization and upgrading of the trade structure. JPMorgan Chase points out that the strong growth in foreign trade has stabilized China's economic fundamentals, boosted fiscal revenue, and significantly strengthened decision-makers' determination to promote industrial transformation—enabling them to sustain economic growth without relying on short-term real estate stimulus. This has provided ample space for debt clearance and structural adjustment, while also ensuring the consistent implementation of the "resolutely clear risks" strategy. RewinAnder concurs, noting that the strong performance of foreign trade provides solid strategic support for the Chinese government to promote real estate debt clearance and achieve comprehensive industrial transformation.

Looking ahead to China's development over the next five years, foreign institutions project that the long-cycle bottoming-out of the real estate industry is essentially a profound restructuring of China's economic development model. This process is rife with uncertainties, with the core focus being the pace of policy implementation and the path of regional risk transmission. Currently, Chinese decision-makers are comprehensively advancing risk resolution and industrial transformation, adopting targeted regulatory measures for real estate enterprises and urban investment platforms, and striving to achieve effective isolation of various risks. In the short term, industry adjustments will continue to weigh on investment and consumption growth, thereby impacting China's overall economic performance; in the long term, Goldman Sachs emphasizes that reducing the economy's excessive reliance on real estate is a key hurdle that China must overcome in its economic transformation, and the effectiveness of this transformation remains to be seen over time.

RewinAnder states that China's real estate is currently in a historic period of strategic transformation, with long-cycle bottoming-out and debt clearance being insurmountable stages. Chinese decision-makers adopt a bottom-line mindset to manage risk dynamics, leverage the policy buffer space brought by foreign trade growth to sustain transformation patience, and drive the industry's shift from scale expansion to high-quality development. This process will be accompanied by short-term pains and is subject to multiple uncertainties, such as policy implementation deviations, regional risk spillover, and lower-than-expected demand recovery—but it remains an inevitable step for China's economy to break free from real estate dependence and achieve high-quality development.

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