In China, more and more landlords are deciding not to pay their mortgages

In China, more and more landlords are deciding not to pay their mortgages

For four years, Mr. Zhang (he only mentions his surname) has faithfully repaid his home loan. But every month, he bitterly pays 5,800 yuan (839) in monthly payments: because building the off-plan apartment he bought for 1.43 million yuan has not progressed since the end of 2019. With other owners he has tried to rally, by pretending In front of the real estate developer’s offices first, then in front of the local authorities. without success.

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So when a group of angry homeowners decided to boycott their mortgages in Jingdezhen, eastern China, Mr. Zhang didn’t hesitate for long. In the WeChat (China’s dominant social network) group for owners of a house under construction, everyone agreed to join the movement. There is no other way: defending our rights with the government is pointless. The only leverage we have is to stop pushing.”Explains this engineer who lives in Zhengzhou, the capital of Henan Province, 700 kilometers southwest of Beijing.

A particularly effective lever: Across China, the movement spread like wildfire. Since 2020, thousands of projects have been put on hold due to an underlying real estate crisis. Today, more than 300 homeowner groups in 91 cities have announced a cash-recovery strike. Danger to local banks, which have already faced many cases of default on the part of promoters. Until now, economists had considered Chinese households to be better-paying firms than corporations.

Hundreds of projects are pending

According to Chinese banks, 2.1 billion yuan of loans have been affected so far, but a total of 2 trillion yuan may be at risk, said Chinese investment bank GF Securities. Is the crisis enough to endanger the Chinese financial system? Probably not, because the authorities retain control of the financial system and can inject liquidity if necessary. But their quick reaction shows that they take the problem seriously.

On Monday, July 25, Chinese developers saw their stock prices soar, following information indicating the creation of a real estate rescue fund. Three days ago, Premier Li Keqiang called for action “that promote the development of a healthy and strong real estate market”, referring in particular to the General Fund. According to Bloomberg, it should be used as a priority to complete the stalled projects, and will already be given 80 billion yuan, an amount that could be pushed up to 200 billion or 300 billion yuan. On Monday, Guangzhou R&F Properties rose 9.1% and Country Garden 8% on the Hong Kong stock exchange.

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