China's banking regulator has urged lenders to extend more credit to real estate developers, as a growing number of homebuyers withhold mortgage payments on unfinished housing projects across 50 cities.
Furious at postponed deliveries of pre-sold homes, unclear delivery times and halted construction, homebuyers were last week reported to have halted payments for already sold units in at least 100 residential projects, according to data from industry groups and analysts.
The boycott has worsened fears of financial contagion in the country's troubled real estate sector, which is estimated to account for 18-30 percent of GDP and is a key driver of growth in the world's second-largest economy.
China's Banking and Regulatory Insurance Commission urged banks to "effectively meet the reasonable financing needs of real estate companies, vigorously support rental housing construction" and support project mergers and acquisitions, a representative said in a state media interview published Sunday.
They were also asked to "do a good job in customer service … abide by contracts, fulfill commitments, and protect the legitimate rights and interests of financial consumers".
These measures were required to "maintain the stable and orderly operation of the real estate market", the unnamed official said.
Authorities launched a crackdown on excessive debt in the property sector in 2020, leaving giants like Evergrande and Sunac struggling to make payments and forcing them to renegotiate with creditors as they teetered on the edge of bankruptcy.
Regulators met banks last week to discuss the growing consumer mortgage boycott, Bloomberg News reported, as more major Chinese developers teeter on the brink of default.
The developments come at a time of slowing growth for China and weak property sales, adding to the risk to stability ahead of the Communist Party's 20th Congress in the autumn, when President Xi Jinping is expected to be given a third term.
China banks vow to repay more customers after protests
Beijing (AFP) July 18, 2022 –
Chinese regulators have promised to repay more victims of one of the country's biggest-ever banking scandals, after hundreds of thousands of customers were left without access to funds, triggering rare mass protests.
China's rural banking sector has been hit hard by Beijing's efforts to rein in a property bubble and spiralling debt, in a financial crackdown that rattled the world's second-largest economy.
Four banks in Henan province froze cash withdrawals in mid-April as regulators scrutinised alleged mismanagement, leaving billions of yuan in savings locked up and sparking sporadic demonstrations.
Authorities later named those firms and another rural bank in nearby Anhui province as involved in a scheme to defraud investors — and promised victims would start to get their money back.
"Henan New Fortune Group manipulated five village banks in Henan and Anhui to illegally absorb and occupy public funds … and covered up illegal activities," an unnamed China Banking and Insurance Regulatory Commission representative told state media Sunday, citing a three-month initial police investigation.
"The next stage will be to begin advance payment work for customers with over 50,000 yuan (deposited)."
The Henan banking scandal has dealt an unprecedented blow to public confidence in China's financial system owing to the size and scale of the fraud, analysts say, with the banks involved allegedly operating illegally for more than a decade,
Chinese authorities are desperate to avoid disruptions to social stability just months away from a major congress of the ruling Communist Party.
A July 10 mass demonstration in Henan's provincial capital Zhengzhou was violently quashed, with demonstrators forced onto buses by police and beaten, according to eyewitness accounts given to AFP and verified photos on social media.
Shortly afterwards, Henan's provincial banking regulator said customers with deposits of less than 50,000 yuan ($7,500) would be repaid starting Friday.
But in one WeChat group containing hundreds of depositors, only a handful reported successfully receiving their funds back, according to messages seen by AFP.
A few customers reported receiving their deposits Friday, while others complained that the designated mobile app had bugs and would not let them register, according to local media.
The funds being repaid came from some of the seized assets of Henan New Fortune Group, the company accused by police of manipulating the banks, state broadcaster CCTV reported last week.
Regulators have said depositors will be paid in batches, but did not announce a specific timeframe for the repayment of accounts with more than 50,000 yuan in funds.
