An Experiment Incubated at Harvard to Resolve the Global Debt Crisis (Part 2 of 7)

Faye’s Lens Turns East

In her notes, Faye wrote:

When Nixon announced the Great Decoupling in 1971, China remained outside the gravitational orbit of the world’s main economic system. Yet, almost simultaneously, another story was quietly germinating. Professor Han Feng believes this was one of history’s most unique financial experiments: anchoring wealth not to gold, but to real estate—ignited by the invention of the property title, and launched into motion as the “real estate standard.”

2. The Genesis Experiment on the Eastern Continent: Land as Foundation

When Nixon declared the Great Decoupling in 1971, China—this ancient continent—lay outside the gravitational field of the world’s main economic orbit. It resembled an isolated Oort Cloud body, revolving in its own trajectory, with little gravitational exchange with the main galaxy, and thus bore no share of international financial crises.

Not until 1978 did a grand social project begin—later known as Reform and Opening Up. China, the great ship slumbering for centuries, reignited its engines, altered its course, and set sail toward the starry seas of globalization.

But it faced a foundational, creation-level problem: the absolute scarcity of credit resources.

The early development of Western capitalist civilization had been fueled by brutal and bloody “primitive accumulation.” Their fleets acted as colossal resource harvesters, drawing material and energy from across the globe to feed their home economies—the first barrel of oil that fueled the Industrial Revolution. China, by contrast, had no such external inflows. It had to rely on its own endogenous forces—building an oasis in a desert of credit. It was akin to constructing an entire biosphere from scratch on a barren planet.

At the dawn of Reform, the scarcest resource in China was credit. Without a credible anchor, banks could not extend loans, enterprises could not obtain capital, and markets could not generate liquidity. When the Kuomintang retreated in 1949, it had carried away nearly all of mainland China’s gold reserves to provide the gravitational core for the new Taiwan dollar. The mainland was left like a giant drained of blood: massive in body, but incapable of meaningful economic circulation.

No one foresaw that a seemingly minor policy change would eventually shift the tectonic plates of the entire continent.

That change was the birth of the property title deed.

The “Real Estate Standard”

Professor Zhao Yanjing of Xiamen University, an economist whom Han deeply admires, dissected the genetic code of China’s economic miracle with near-clinical precision. He argued that China’s real estate was never a mere commodity—it functioned as the equivalent of “shares issued by a city,” a market-born hard currency unique to China’s historical conditions.

Before 1998, China had no real estate market. Without clearly defined private ownership, housing could not be credibly traded or used as collateral. Han still recalled being offered in 1993 a two-bedroom apartment inside Beijing’s Second Ring Road for 110,000 yuan—a staggering sum to him at the time, which he promptly declined. Looking back, it was like refusing to buy Bitcoin for a few dollars in its infancy. Yet even had he purchased it, it might not have been wise: in an era of unclear property rights, what one bought might have been no more than a phantom contract—an asset vulnerable to higher-level directives, and potentially null at any time.

Then came 1998. With the introduction of property title deeds, and later the passage of the Property Law in 2008, a light like Genesis itself dawned. For the first time, land and housing in China were granted clear, tradable, legally protected ownership.

This was the “Big Bang singularity” of China’s credit universe.

With clearly defined property rights, banks’ credit engines roared to life at unprecedented power. Ordinary people, enterprises, and local governments—all could now mortgage land and housing to draw liquidity from the vast reservoir of banks. The renminbi finally found its anchoring object. If the Bretton Woods dollar was a “gold standard,” then, as Zhao Yanjing incisively summarized, post-Reform China effectively operated on a “real estate standard.”

The Scale of a Miracle

In barely two or three decades, one of the largest, fastest “wealth-creation movements” in human history unfolded. Millions of people participated in the issuing and trading of this “urban stock” through the buying, selling, and mortgaging of real estate. This was no mere speculation—it was the collective act of hundreds of millions, who committed their lifetime savings and future earnings as votes of confidence in China’s urbanization process, together forging a wealth consensus of unprecedented scale.

How large was this consensus? At its peak, the total value of China’s real estate market reached an astronomical $65 trillion USD—several times greater than its economic output.

It was this massive credit foundation of real estate that fueled China’s economic rise over the past twenty years. It funded infrastructure construction and the boom of the internet economy, providing a ceaseless flood of monetary oxygen. The modern skyscrapers, highways, and high-speed railways stretching across China, often surpassing those of Western cities, all trace their funding back to this colossal mortgage machine centered on real estate.

Even an ordinary working family could, by mortgaging a property, easily obtain millions in funding—enough to send children abroad for education. Before the advent of the “real estate standard,” such a scenario was unimaginable. Han’s fellow Tsinghua alumnus, real estate magnate Lan Chun, once said to him with some frustration: “They all curse us for driving up housing prices. But hasn’t everyone’s wealth increased as a result?“

His words revealed the core of the model: credit expansion driven by rising asset prices, creating enough “money” to propel economic growth. It was like a star expanding through its own nuclear fusion, casting light across an entire galaxy.

The Limits of the Model

Yet just as any civilization dependent on a single energy source eventually faces depletion, China’s “real estate standard” reached its physical limits.

First, it created vast social problems. Rising housing prices became an invisible gravitational field, binding the life energy of an entire younger generation to narrow parcels of land. Families poured their life savings and future earnings into apartments, leaving little capacity for risk-taking or innovation. The unrest in Hong Kong in recent years stemmed in part from this generational despair born of unaffordable housing—a civilizational decline in vitality.

Second, this wealth consensus was insular—incapable of globalization. China’s real estate is among the most expensive assets in the world, yet its consensus ends at national borders. You cannot mortgage a Beijing apartment to a New York bank to access global liquidity. Thus, despite massive renminbi issuance, the currency’s internationalization lagged far behind the size of its economy. Real estate was a powerful local gravitational field, but it could not radiate across the universe.

The central government had long recognized the risks of this model. The policy of “houses are for living in, not for speculation” was an attempt to cool an overheating engine. But the greater crisis lies ahead: what happens when this engine stops—or reverses?

When property prices stop climbing, or begin to fall, the entire credit chain built upon them unravels in cascading collapse. Evergrande’s 2 trillion-yuan debt black hole, the tens of trillions in hidden local government debt—all were predicated on the fragile assumption of “land values only rise.” Once that assumption fails, banks stop lending, businesses and households stop borrowing, liquidity vanishes as though sucked into a black hole, and the system drifts toward heat death.

Japan has already rehearsed such a future. After its property bubble burst, Japan endured decades of stagnation: social vitality drained, young people choosing not to buy homes, not to marry, not to have children. Civilization entered a “low-desire equilibrium”—a slow, dignified decay.

Now, China stands at this crossroads. The great vessel of real estate can no longer carry the mission of national rejuvenation. It has fulfilled its glorious and heavy historical task. Now, it drifts slowly toward the shoals.

Faye’s Observations and Summary

In her annotations, Faye wrote:

Real estate was indeed a civilization-level credit ignition experiment, solving the problem of how a China without gold reserves could integrate into the global economy.

But it left behind an even larger question: When property stops rising, what will propel the great vessel forward?

Suspense

At the chapter’s close, Faye left one question hanging:

If gold is too heavy, real estate cannot globalize, and dollar credit is exhausted—then who will become the “hard currency” of the 21st century?

Preview | Episode 3: Hard Currency of the Information Age — The Rise of Quantum Gold (Bitcoin, Trump’s pivot, and the Harvard NBW experiment).

Image source: Shutterstock