Due to the collapse of the real estate developments in China, many projects have been suspended. Homebuyers of unfinished projects are in desperate circumstances, and they blame the government’s mismanagement and also point fingers at the banks. This issue affected grade A bank shares, as they continued declining, and the market value evaporated by nearly $104 billion in ten trading days.
Investors of unfinished buildings protect interests; construction suspension spreads to 20 provinces
Recently, investors of unfinished buildings in many places have joined forces.
But most homebuyers hope that developers will resume construction and deliver homes as soon as possible, or they will be forced to stop paying their mortgages.
On July 14, Yi Cai newspaper reported that, according to preliminary statistics, there are currently about 150 real estate projects cutting supply across the country, including about 20 provinces such as Henan, Hunan, Jiangxi, Hebei, Guangxi, and Shandong, and nearly 70 cities and counties.
Evergrande, Yango, Tahoe, Sunac, Kaisa, etc., have gone bankrupt. Unfinished projects are concentrated in tier 3 and 4 cities. Still, some real estate projects in tier 1 or 2 cities such as Shenzhen, Shanghai, Suzhou, Wuhan, and Nanjing are also affected.
Homebuyers accuse banks of ‘four crimes’
Regarding the case that homebuyers of unfinished buildings do not want to repay their loans, the customer service departments of Industrial and Commercial Bank of China, Agricultural Bank of China, and China Merchants Bank replied that there is currently no relevant guaranteed measure to handle unfinished buildings. If the loans to investors of these projects are suspended, leading to overdue payments, they will not receive any special treatment.
However, according to Yi Cai, in addition to pointing out the primary responsibility of investors and local housing construction supervisory agencies, some investors have alleged in writing that the bank as a lending facility has committed “four crimes”: First, it is beginning the mortgage before the building’s main structure is completed.
The second is transferring mortgage money to an unsupervised account, contrary to regulations.
The third is not actively performing the obligations of the fund custodian, leading to unclear spending of the house sale fund.
The fourth is knowing that problems with a project need to be addressed. The banks are rushing to have the online contracts signed and still quickly complete the loan procedures, sign the yin-yang contract, commit credit frauds, and fund withdrawals.
(“Yin-yang contract” refers to signing two contracts with different contents but the same issue, including one domestic contract and one foreign contract. In which the domestic contract is the essence of the matter, the real intention of both parties can be done in writing or orally).
According to Sina, China’s Central Bank’s 2021 figures show that the banking industry’s housing loan balance is about $6 trillion. According to the financial report’s statistics, six large state-owned banks and nine joint stock banks have outstanding personal housing loans exceeding $7 trillion.
NetEase reported that according to an estimate by GF Securities, the average housing area temporarily suspended from construction by contract-violated real estate companies is about 20%, and contract-violated bankrupt real estate companies account for about 25% of the industry’s total production capacity.
Real estate troubles hit grade A stocks
Affected by news such as “real estates under construction” and “supply cutting,” grade A bank shares continued to plummet. On July 14, banking stocks dropped sharply again, while real estate and construction stocks also “plummeted hand in hand.”
According to NetEase, Dongcai Choice data shows that, in just ten trading days, it can be seen out of 42 stocks, 38 stocks fell, and they were all “big guys.” Only four stocks rose in price, of which only Changshu Bank and Wuxi Bank had a market value of more than one and a half billion.
At the close of June 30, the total market value of 42 constituent stocks in the banking sector was $1.5 trillion. By July 14, this figure had dropped to $1.4 trillion.
In ten trading days, the entire Chinese banking industry evaporated nearly $104 billion off market value. In particular, China Merchants Bank fell 13.55% in 10 trading days.