China’s banking, real estate problems affect Hong Kong: analyst

With the sluggish economy of mainland China’s banking and real estate system, bank depositors unable to withdraw their money and home buyers boycotting mortgage repayments to banks, Hong Kong’s bank lending to the mainland is affected and its banks are face increased risks.

“Improper loan ratios for mainland Hong Kong bank loans are likely to rise further this year in light of China’s economic slowdown,” economic analyst Helen Zhang said in a statement. July 14 report by the American rating agency Moody’s.

The majority of loans banks make outside of Hong Kong are in mainland China, accounting for 5-35% of its overall loan portfolio. Real estate loans are estimated to account for at least 20-30% of Hong Kong bank lending in mainland China.

Since the end of 2021, refinancing risk has increased due to weak domestic real estate sales, which will reduce the repayment capacity of domestic real estate companies and increase asset risk for Hong Kong banks, the report said.

Bank accounts in China frozen, affecting Hong Kong residents

On July 14, a Hong Kong Legislative Council subcommittee meeting raised concerns about the freezing of bank accounts of many Hong Kong residents in mainland China in recent years.

Leung Mei-fun, a member of the pro-establishment party, said she made a special trip to the mainland last year to unfreeze her frozen account and increase her online transfer limit. Afterwards, she was isolated for two weeks to respond to anti-virus measures on the mainland.

Another member, Leung Hei, said his China Construction Bank account was closed a year ago. The account was intended to manage expenses such as rent collection and property fees for its stores in Dongguan City, Guangdong Province.

According to Chinese banking rules, if a bank account has not been used for a long time or if its Mainland Travel Permit – a travel document issued by China for residents of Hong Kong and Macao – expires, the account will be frozen.

This rule has already affected at least hundreds of thousands of Hong Kong residents, Leung said.

Due to the pandemic, the majority of Hong Kong residents have been unable to travel to the mainland for the past two years to use their accounts.

Account holders have not been able to withdraw funds from their accounts at village banks in Henan province since late April, as before reported in the Chinese-language edition of The Epoch Time.

More than 300 depositors of a village bank in Henan province gathered outside the Henan Supervisory Office to protest and demand that they can withdraw their money legally, June 25, 2022. (Courtesy interviewee/The Epoch Times)

On April 18, bank depositors in Henan Province were informed that they could not withdraw their money from banks in New Minsheng Village of Yuzhou City, Huimin Village of Shangcai County, Huanghuai Village of Zhecheng Country and New Oriental Village of Kaifeng City.

These banks issued notices stating that the bank withdrawal failures were due to “system upgrade and maintenance” and that online and mobile banking would also be suspended.

From May 18 to 21, depositors went to the provincial government and the banking and insurance authority – both in Zhengzhou, the capital of Henan province – to demand that banks return their deposits, but they been kicked out, beaten, pepper sprayed and arrested by the police.

In June, some protesters found that their health code was marked red, meaning they are required to self-isolate. The Health Code is a mobile application through which the ruling Communist Party oversees the vaccination and health status of individuals, but it is more often used as a tool when the authority wishes to limit the outdoor activities of people for political reasons. Thus, depositors were prevented from going to banks to obtain money or to complain.

On July 10, when at least 2,000 depositors gathered outside the Zhengzhou Central Bank branch, they were violently attacked by plainclothes police.

Subsequently, the authorities announced that they would start the prepayment measures on July 15, but in fact many depositors are finding that they are still unable to access their deposits.

Similar cases also occurred in Shanghai. The phenomenon has spread from Shenzhen and Dandong in the south to Liaoning Province in the north in recent months, prompting heightened concern among Chinese nationals.

Observers see this as a sign that China is facing a meltdown in the financial system, and officials are trying to find ways to buy time so they can fix it.

Restrictions on withdrawing money

In April, Agricultural Bank, Pudong Development Bank and Everbright Bank successively announced that they were lowering transaction limits related to online business.

At the end of June, the Agricultural Bank further limited the daily spending limit to RMB 1,000 (about US$148) without informing depositors in advance.

Banks are cutting spending limits are also happening in Hong Kong.

Nanyang Commercial Bank in Hong Kong announced on June 27 that it would halve the daily limit for online banking services, including transfers and remittances to third-party accounts, from HK$1 million (about $127,390) per day starting July 24.

The Bank did not explain the reason for such a decision. Although it has long been known as a CCP-owned bank in Hong Kong, the main owner is China Cinda Assets Management.

Epoch Times Photo
A Chinese worker walks past a new housing project in Beijing on April 1, 2013. (Mark Ralston/AFP via Getty Images)

People withhold mortgage payments

With more and more “rotten tails” or unfinished buildings emerging across the country in recent years, a large number of home buyers have stopped paying their mortgages to banks.

As of July 19, based on incomplete statistics, about 230 project owners have issued a mandatory loan suspension, involving 82 cities in 25 provinces and autonomous regions, the China Real Estate Information Corporation (CRIC) said. reported HK01 July 21.

On July 14, thousands of homeowners gathered outside the Xi’an Banking and Insurance Supervisory Bureau, accusing it of ignoring banks’ violations of home loan regulations.

The Industrial and Commercial Bank of China (ICBC), Huaxia Bank and Bank of Zhengzhou are suspected of illegally granting loans and supervising funds during the pre-sale of homes, protesters said.

Cause of Unfinished Buildings in China: Analysis

Fearing a growing crisis in the financial system, China’s property regulator is urging banks to finance property developers so they can complete housing projects and speed up the delivery of homes to buyers, people familiar with the matter said, Bloomberg reported July 18.

“It’s a vicious cycle,” news commentator Xiao Ruoyuan said on his web program, further explaining that people are unwilling to buy “off-plan property,” property before it is built, lest it be “rotten property”. tail” or unfinished building in the future. Developers don’t have enough money, so there are more and more unfinished buildings. In addition, once a project is delayed, the cost of raw materials increases and the number of pre-sold goods cannot support the completion of buildings.

In an interview with the Asia-Pacific office of New Tang Dynasty, Epoch Times columnist Wang He said the cause of so many unfinished buildings is the result of collusion between banks, real estate companies and government authorities. PCC, which each take a share of the depositors. ‘ silver.

Many buyers with unfinished buildings have stopped making mortgage payments collectively, which they have never done before, creating an additional complication for the CCP. “With the ongoing debt crisis, the government will not have the money to complete the unfinished construction,” Wang said.

Some commentators have said the CCP is unable to quell the wave of mortgage suspensions and will temporarily adopt a soft policy to dodge the broader outrage that may arise at the upcoming Twentieth Congress.

To ensure Xi Jinping’s re-election, the CCP will not aggravate the problems before the Twentieth Congress. This will delay six months to a year, that is, until the victim groups can be split up and disbanded, Xiao said.

Xiao estimated that at least 5 or 6 trillion RMB (about 741 to 889 billion US dollars) is needed to solve the problem of unfinished buildings, but the central government, local governments, banks and housing companies do not don’t offer money or don’t have enough. the money to do so, Xiao said.

The deterioration of unfinished real estate has increased asset risk for Hong Kong banks.

Additionally, “the majority of Hong Kong banks’ lending to China’s real estate sector is offshore, which is generally riskier than onshore, given the sources of loan repayments, collateral, and loan recovery issues.” , shelp Moody’s.

Nie Law

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Chan Lam

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