["Economics &Politics, EarlyView. ", "\nABSTRACT\nWe construct a structural vector autoregressive (SVAR) model and a dynamic stochastic general equilibrium (DSGE) model with liquidity constraints in the real estate and household sectors to analyze China's property market downturn. We find that: First, although the slump originated from a real estate liquidity shock, falling housing demand poses a greater risk. Second, China's project completion assurance plan has limited impact, primarily benefiting firms with ample liquidity when the sector faces binding liquidity constraints. Third, both expansionary monetary policy and lower mortgage rates can effectively stimulate the macroeconomy. Fourth, direct central bank lending or guarantees for illiquid developers may better address systemic risks.\n"]