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Hello, my name is Anthony and welcome to the French newspaper digest. More and more Chinese property owners are deciding not to pay their mortgages. This is a key headline in Le Monde today. The article said that this is a risk for banks, so that the government is worried.
The Le Monde article cites an example. Mr. Zhang, an engineer in Zhengzhou, bought a house for 1.43 million yuan. He has repaid 5,800 yuan every month for four years. However, the construction of the house stopped at the end of 2019. He used to protest in front of the developer’s office with other property owners and at the local government. But nothing worked.
Later, seeing that a group of property owners in Jingdezhen, East China decided not to repay the loan, Mr. Zhang had nothing to hesitate. In the WeChat community of homeowners, everyone agreed to join the non-payment movement. Mr. Zhang said, there is no other way. Going to the government to defend your rights is useless. No more loan repayments, that’s the only way.
The French newspaper Le Monde said that this method is really useful. The mortgage non-payment movement is like a spark that starts a prairie fire. At the beginning of 2020, there were only a few thousand cases of non-payment of mortgages caused by the real estate crisis. Now, in 91 cities, 300 groups of property owners have announced the suspension of loan repayments.
This is a risk for local banks. According to statistics from banks across China, the amount of property owners who have stopped repaying their mortgages is 2.1 billion yuan. However, GT Securities, a Chinese investment bank, estimates that the total amount that may be threatened is 2 trillion yuan.
Will the crisis caused by this money threaten the Chinese financial system? Maybe not yet, Le Monde said. Because the Chinese government controls the financial system, it can inject cash if necessary. However, the Chinese government attaches great importance to the issue of homeowners stopping mortgage repayments and takes swift action.
On July 25, Chinese real estate developers saw their stock prices recover after news that China was going to set up a real estate rescue fund. Three days ago, Chinese Premier Li Keqiang called for measures to encourage the steady and healthy development of the real estate market, raising the issue of public funding. According to a report by Bloomberg, the money is already 80 billion yuan, and it may be added to 200 billion or 300 billion yuan in the future, mainly to help the suspended real estate projects to complete construction.
According to Le Monde, the real estate industry alone accounts for a quarter of China’s economic growth.
The current crisis in China’s real estate is the result of measures taken by the Chinese government itself: the Chinese government saw that the real estate industry in some regions was over-indebted and decided to restrict their lending to banks. As a result, Evergrande Group has repaid its debt, and the total amount is expected to be 280 billion euros. This debt was borrowed from banks, investors, and suppliers, and now Evergrande has no way to repay it. Therefore, hundreds of real estate projects in China have been stopped.
Le Monde said that even if the scale of homeowners to stop mortgage repayments is limited, but this has caused a further blow to people’s confidence in developers. Wang Dan, chief China economist at Hong Kong’s Hang Seng Bank, said this lack of confidence is contagious and will have a serious impact on real estate sales. And the real estate market is already sluggish. At present, the proportion of homeowners who do not repay their loans is still very low, and the danger is that the proportion of developers who do not repay their loans increases. Then when people dare not buy a house, the capital turnover problem of developers is more serious, and the risk of bankruptcy is even greater.
Back to the topic of homeowners. Le Monde said Mr. Xi, 29, was a white-collar worker in Shanghai. At the end of 2020, he bought a 1.7 million yuan property in Wuhan and borrowed 500,000 yuan from his family as the first money. Then loan 1.2 million yuan to the bank. But a few months after the contract was signed, the construction site stopped. The developer Greenland Group was unable to repay its debts. So this young man has to pay the rent of a room in Shanghai every month and a loan of 6,900 for a property on paper. His monthly income is 9,000 yuan, and he has no money left to live. He said that he eats in the cafeteria and does not consume at all. In the past two years, he has not bought new clothes. In mid-July, he also decided to join the movement to not pay his mortgage. He said the government had completely lost its credibility.