Mortgage strikes threaten China’s economic and political stability
The alarm bells are ringing louder. Last week, hundreds of depositors gathered in front of the Zhengzhou branch of the People’s Bank of China in the provincial capital of Henan, demanding their frozen life savings held in rural banks. A day later, tens of thousands of homeowners threatened to stop paying mortgages on scores of unfinished housing projects they had purchased. All of this happened in a week where the officials reported lacklustre second-quarter economic performance.
China’s economy is facing a dangerous cocktail of stalling growth, high unemployment, spreading mortgage payment strikes and continued Covid shutdowns that threaten to explode with serious social and political consequences.
The worsening meltdown in the country’s debt-laden property market is at the heart of the problem as the toxic $300bn (£250bn) debt pile unleashed by last year’s collapse of the giant developer Evergrande slowly infects the whole economy.
The initial official response to the bank demonstration was to call in squads of plain-clothed enforcers to use violence to break it up. Authorities have since claimed the bank has been taken over by “criminal gangs” and have promised to start allowing access to money.
When it emerged last week that homebuyers across the country were banding together to refuse payments on mortgages on homes left unfinished by debt-distressed developers, it was the another sign that the faith of ordinary Chinese people in the property market and wider banking industry is beginning to dissolve.
“Why do I have to pay mortgage when the property I bought has yet to be finished?” said one angry social media user after watching a viral documentary about how hundreds of homebuyers in central Chinese city of Xi’an have to
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