In the wake of some of the most challenging economic conditions seen in decades, China’s middle class is demonstrating a level of defiance that has arguably never been seen in the country’s modern history.
The outside world first became aware of rumblings when China Evergrande’s inability to meet its debt obligations, totalling over $300 billion, began to make headlines throughout 2021.
Since, China’s second-largest property developer has been on a downwards spiral – defaulting on its offshore bonds, selling off assets, and for the most part of 2022 its Hong Kong-listed shares have been suspended pending a restructuring proposal, while projects have stalled.
But it’s now becoming clear that China Evergrande is just the headline act in what is Chinese debt horror story that runs far deeper.
Chinese property pre-sale nightmare
What makes the unfolding property crisis in China so unique (and damaging) is how widespread the pre-sale model is in the country’s residential property sector. Experts put the percentage of Chinese property developer revenue generated through pre-sales at close to 90%.
In most cases this means the buyer pays a deposit and begins making mortgage repayments before they can even live in the property. The Chinese have been so willing to do this over the past two decades because Chinese property prices have been rising so quickly and they don’t want to risk having to pay more if they wait.
But in recent years, hundreds of thousands of buyers have never seen their apartments, as developers like China Evergrande have run up seemingly insurmountable debt, just as the property market slowed.
China Evergrande’s incomplete apartment complexes become the catalyst for rare public demonstrations in China in 2021.
But more recently, buyers of incomplete apartments developed by multiple troubled Chinese developers, have shown an increasing level of defiance. They’re refusing to pay mortgages and are using social media to document the extent of the country’s property woes.
Buyers not silenced
In letters seen by Asia Markets, sent on behalf of buyers to banks, developers and Government authorities, the Chinese Government is heavily criticised.
For example, the mortgage boycott letter below, sent on behalf of buyers of apartments in the Evergrande Centre development in Hefei City sates:
“It has been nearly ten years since the Hefei Evergrande Center was launched in 2013. Since then, more than a thousand units have been sold, but the project was completely shut down in 2018. Year to date, the Government has repeatedly promised to resume work, but all have failed… Many owners have given feedback on their questions, but no government departments have given clear answers, just multiple excuses.”
But what’s more, to ensure the extent of China’s property woes are clear to all, there’s a coordinated effort to document all mortgage boycotts and incomplete developments across the country.
This is despite efforts by the Government to shut it down.
The repository, titled WeNeedHome is now publicly viewable on Github after being censored on Chinese social media platforms including, WeChat and Weibo.
It contains details on over 325 incomplete developments across China, each containing thousands of apartments. Whistle blowers have also submitted corresponding mortgage boycott letters.
Around 75 of the entries are China Evergrande projects. Other high-profile developers on the list include Sunac China Holdings, Kaisa Group Holdings, and China Vanke.
The repository is the first detailed insight the outside world has had on the Chinese property sector, and it could be worse than many first thought.
In the past two weeks it has grown by around 30 submissions, indicating it is still active and will likely continue to grow over the coming months.
Middle class unrest a real threat
While it might have seemed unthinkable just a few years ago, China’s middle class has become increasingly belligerent.
As reported by Asia Markets, anxious rural bank customers have been the latest to stage mass public protests over the inability to withdraw funds.
While in Shanghai, public and online protests, over harsh COVID-19 lockdowns have made world headlines.
A China-based social media analyst, speaking to Asia Markets on the condition of anonymity, draws links between those protests and the 2021 China Evergrande protests.
“Chinese social media was full of videos of Evergrande investors yelling inside headquarters and on the streets, I think this would have certainly emboldened those protesting at the banks, this wouldn’t have been seen 3 or 4 years ago.
“The fact now we have property buyers refusing to pay their loans and using internet platforms like GitHub to coordinate their efforts is something I have not seen before, there is something changing.
“I have also watched with interest many on social media critical of China’s handling of Taiwan and the fact the U.S. ignored warning about Nancy Pelosi visiting, there has been much anger about that.”
The middle class uprising comes ahead of the 20th National Congress of the Chinese Communist Party, in which Xi Jinping will seek an unprecedented third term as President.
Discontent amongst China’s middle class puts him in a precarious position.
In a Foreign Policy article, China expert Craig Singleton, explains the President is now “watching his back”
“Put plainly, as China’s economy stumbles and its global standing tumbles, Xi is quickly realizing that after almost a decade in power, his demand for “absolute loyalty” within the CCP remains quixotic at best—and foolhardy at worst.”
“A few months before his third-term coronation—growing voices within the party are raising uncomfortable questions about not just Xi’s economic stewardship but his entire governing philosophy.”
A disgruntled middle class could embolden factional rivals, which is why many expect Xi to introduce measures to address frustrations, including a full-scale bailout for property investors.
But the cost would be immense.
Estimates put the value of Chinese residential pre-sale property sold since 2020 at around US$5 trillion. If only 20% needed to be bailed-out, the CCP would need to find US$500 billion.
Over the next few months, we’ll find out just how confident Xi is in quelling his factional rivals, and an increasingly agitated middle class.