It’s not just homebuyers in China; suppliers are now boycotting loans as well

Some Chinese property developer providers are refusing to repay bank loans due to arrears owed to them, a sign that the loan boycott that began with home buyers is beginning to spread.

Hundreds of real estate developers have complained that they can no longer pay their bills because developers, including China Evergrande Group, still owe them money, Caixin said, citing a statement received from a supplier on Tuesday.

A group of small businesses and suppliers circulated a letter online saying they would stop paying their debts after Evergrande’s cash crunch left them out of their own pockets.

“We have decided to stop paying all loans and arrears and to advise our colleagues to decline any request for payment on credit or commercial invoice,” said the group in the letter dated July 15, which was sent to the office of the developer in Hubei. “Evergrande should be held accountable for the consequences of the chain reaction of the supply chain crisis. “

Evergrande did not immediately respond to a request for comment. Calls to the media office of the housing authority in Wuhan, the capital of Hubei province, went unanswered on Wednesday morning.

The payment protest is the latest sign that a movement of homebuyers to boycott mortgages on unfinished homes in China is spreading to affect other sectors of the economy.

The development underscores a dilemma for Xi Jinping’s government as it struggles with who to save as the country’s housing crisis deepens: relief from some borrowers could lead to threats of non-payment from a number of others. While meeting requests for support could strain government finances, ignoring them could lead to a spiral of defaults as more and more borrowers refuse to meet their obligations.

The mortgage strike, which began in late June in a stalled Evergrande development in Jingdezhen, quickly spread to at least 301 projects in some 91 cities. The protests have exacerbated the country’s housing problems and threaten to derail attempts to revive the market in the midst of an economic downturn.

Authorities have urged banks to increase lending to builders to help complete the projects and are also considering giving homeowners a grace period on payments, Bloomberg reported this week.

Buyers’ refusal to pay their mortgages stems from the widespread practice in China of selling apartments before they are built. Over the past year, debt-ridden Chinese developers have gone into debt repayment crisis as funds ran out and construction stalled on more and more projects.

Chinese banks say the risks of non-payment of home loans are controllable. So far, they have revealed only 2.1 billion yuan ($ 311 million) of risky credit. However, GF Securities Co. predicts that up to 2 trillion yuan of mortgages will be affected by the boycott.

Overall, Chinese banks are sitting on 38 trillion yuan in outstanding residential mortgages and 13 trillion yuan in loans to the country’s beleaguered developers.

The video shows the tanks lined up near the failing Chinese bank

A video showing tanks lined up on a road in China shocked the internet.

Citing local media, Reddit users say the footage is from Rizhao, Shandong province, and that tanks have been deployed to protect the local branch of a bank involved in the scandal.

The problem first emerged in April when the South China Morning Post (SCMP) reported in an article that residents of Henan and Anhui provinces were denied access to bank accounts due to a “system update. “.

Since then, bank deposits at Yuzhou Xinminsheng Village Bank, Shangcai Huimin County Bank, Zhecheng Huanghuai Community Bank and Kaifeng New Oriental Country Bank in Henan Province and Guzhen Xinhuaihe Village Bank in Henan Province near Anhui have been been affected, the SCMP said.

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