PROTEST BY ANGRY investors are common in China. Average people who have been deceived by online lenders or other scammers have little recourse. They occupy office lobbies until a senior executive seems to calm their nerves. However, it is rare for protesters to target well-known companies, and even rarer for connected protests to crop up across the country. Events like these have made Evergrande, a huge real estate developer on the verge of failure, a spectacle in recent days.
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The company has approximately $ 300 billion in debt, the most of any real estate group in the world. On September 13, its head office in the southern city of Shenzhen (pictured) was besieged by investors demanding their money be returned. Similar scenes were seen in Evergrande’s offices in several other cities. In a video circulating online, a woman yells into a loudspeaker, demanding responses from Evergrande staff. In another, an executive tries to answer questions in a cramped corridor, before being shouted by the demonstrators.
Since 2020, the Chinese government has sought to limit borrowing from real estate developers. The rule changes that are part of a larger campaign against debt have pushed several real estate groups into default, or to the brink of it. This is where Evergrande, once considered too big to fail, now stands. The company hired advisers to help it solve its financial difficulties and warned on September 14 that it could default. Many analysts who follow the group say such a result, followed by restructuring, is starting to seem inevitable.
Many people who protested invested money in financial products managed by Evergrande. Others are suppliers and contractors who have to pay for their work on projects that have stalled all over China. In recent weeks, the company has attempted to sell off some of its unfinished housing projects in order to pay off debts. Some videos also claim to show frustrated employees berating their bosses (Evergrande has well over 100,000 employees).
The largest group of people who fear harm are homebuyers who have already paid for their apartment. The Chinese real estate market has long relied on people coughing before their homes were finished, in order to generate working capital for developers. Of Evergrande’s roughly $ 300 billion in liabilities, about 1.3 billion yuan ($ 200 billion) is cash that customers have deposited for homes that have yet to be completed, Capital Economics estimates. a research company. This equates to the value of 1.4 million individual properties.
The Chinese authorities are adept at handling small protests, which they often refer to as “mass incidents”. When China’s billion-yuan peer-to-peer lending boom ended in 2018, tens of thousands of ordinary people showed up at the doors of companies that had swallowed their savings instead of delivering the promised returns. These incidents were diffuse. It was rare for more than 100 people to protest at a given site. But the problem became so acute in Hangzhou, a hub for online lending companies, that the local government was eventually forced to convert two stadiums into venues that could receive complaints from aggrieved investors.
Xi Jinping, Chinese President, has pledged to bridge the yawning chasm that separates China’s haves from their have-nots. Particular attention is paid to high real estate prices. It is not yet clear whether this campaign will lower prices. But it could very well put an end to two decades of unbridled increases. House price growth in China’s four largest cities slowed slightly in August compared to the previous month.
Images of outraged investors, suppliers and employees, which have been shared widely on local social media, underscore the risks Mr. Xi runs as he orders state regulators to curb speculation on the housing and cracking down on market excesses in the name of greater income equality or, as he calls it, “common prosperity”. Then again, Xi and his team can take another moral from these angry smartphone videos: that too little state control is everyone’s greatest risk. ■
This article appeared in the China section of the print edition under the title “Rising wet”