China facing more economic woes ahead of GDP release with mortgage boycott in over 80 cities

Buyers of over 230 properties in 86 cities have joined together to collectively refuse to make mortgage payments for unfinished, pre-sold units unless construction resumes

China is set to announce its second-quarter economic growth figure on Friday, with Chinese data provider Wind forecasting 1.1 per cent year on year growth

4-MIN READ4-MIN

Developers in China have been struggling since last year following Beijing’s regulatory crackdown as part of its deleveraging efforts and moves to contain soaring property prices. Photo: Bloomberg

Published: 10:00pm, 14 Jul 2022Updated: 9:44am, 22 Jul 2022

China’s economy, which is on course to record its lowest quarterly growth rate in two years, is facing fresh risks from an unfolding mortgage boycott quickly spreading across the country.

In the past week, buyers of more than 230 properties in 86 cities have joined together to collectively refuse to make mortgage payments for unfinished, pre-sold units unless construction resumes, according to real-time updates on software development platform Github under the “WeNeedHome” project.

The crisis further adds to concerns over the financial and social stability of the world’s second largest economy following a cash crisis at rural banks in two provinces, especially at a particularly sensitive moment ahead of a key Communist Party gathering later this year.

It exposes more financial weakness and is set to affect already-shaken confidence in the system, according to independent economist Hong Hao.

Banks will have to write down loans, affecting their capital sufficiency and lending ability, at a time when bank lending is most needed to sustain growth

Hong Hao

“Banks will have to write down loans, affecting their capital sufficiency and lending ability, at a time when bank lending is most needed to sustain growth,” said Hong.

The current economic slowdown, brought on by repeated lockdowns under China’s zero-Covid strategy, has weighed on both homebuyers and real estate developers.

Developers in China have been struggling since last year following Beijing’s regulatory crackdown as part of its deleveraging efforts and moves to contain soaring property prices.