In careful protest, China Evergrande's investors press for action

China Evergrande New Energy Vehicle

27/11/2024 01:19

* 
      Liquidation of property developer Evergrande hurt
thousands of
middle-class investors
    

        * 
      Disgruntled investors visit three government offices in
Shenzhen
to seek Evergrande update
    

        * 
      Protests aim to avoid unlawful public protest perception
    

        * 
      China's economic slowdown heightens concerns about rising
social
strains
    

  
    By David Kirton and James Pomfret
       SHENZHEN/HONG KONG, Nov 27 (Reuters) - Hundreds of
Chinese investors who lost savings in the collapse of China
Evergrande launched a coordinated campaign this month to press
authorities for an update on the failed property developer,
according to people with knowledge of the effort.
    In the previously unreported action, small groups of
disgruntled investors turned up at three Shenzhen government
offices in succession to ask for an update on an investigation
launched more than a year ago, the people told Reuters. 
    They said they hoped this method of applying pressure on
officials would not be deemed as a form of unlawful public
protest.
    While the grassroots action is unlikely to shape the
court-ordered liquidation of Evergrande, which failed with more
than $300 billion in liabilities, it shows how deep-seated
frustration remains for the middle-class Chinese who saw their
investments wiped out.
    The cautious protests also come at a time when China’s
government has been on high alert for signs of social strain
caused by financial stresses from a slowing economy.
    "If we don't speak out now, there will never be a chance,"
one of the Evergrande investors who participated told Reuters.
Like others, the person asked not to be named because of the
fear of reprisal by Chinese authorities.
    A real-estate downturn that began in 2021 has squeezed
financing for local governments, home owners and businesses tied
to a sector that once accounted for a quarter of China's
economic activity.
    Aggrieved investors in now-worthless “wealth management”
products issued by Evergrande held protests in late 2021 and
early 2022 outside the developer’s offices after it missed
payments to contractors and creditors.
    The organised effort by Evergrande investors over the past
week in Shenzhen marked the first sizeable protests since 2022. 
    They were organised to follow official channels for
expressing grievances in order to avoid antagonising
authorities, people with knowledge of the campaign told Reuters.
    More than 500 former Evergrande investors joined three
separate actions in Shenzhen, according to people who took part.
    On Monday, a group visited an investigation bureau in the
district where Evergrande was headquartered. On Tuesday, another
group queued at the city's economic crimes bureau. On Wednesday,
a third group went to a city court.
    The aim was for the investors to reach the front desks of
those government offices one-by-one in a manner that would not
look like a public protest or invite a crackdown by police,
people involved said.
    Reuters could not confirm the total number of people
involved. A Reuters reporter saw dozens of people outside the
investigation bureau on Monday, and dozens of others gathered
near the court on Wednesday.
    The planned timing and meeting location for the action was
only shared among a group of investors on the day itself, the
people said. The Evergrande investors have remained in touch
with each other over the past two years in small WeChat groups.
    "We need to stay low profile and talk one-on-one, otherwise
we’ll be shut down," one of the participants told Reuters.
    Evergrande, Shenzhen police, which oversees the
investigation bureaus visited by the investors, and the city
court did not immediately respond to comment requests.
    
    SOCIAL STRAINS
    Lured by promised yields of 12% and freebies including Gucci
bags, more than 80,000 people - including employees - invested
in Evergrande's wealth management products. That investment
raised almost $14 billion for the developer in the five years
before its collapse.
    Shenzhen police said in September last year they had
detained some staff at Evergrande Financial Wealth Management
Co, the group's investment arm, as part of an investigation into
potential wrongdoing in the run-up to the developer’s collapse.
    The pressure for answers from Evergrande investors comes at
a time when social strains related to slower economic growth
have become a top-of-mind concern for China’s government - and
investors.
    Chinese authorities regard social stability as the
foundation for prosperity in the world's second-largest economy.
    Unease has grown over a spate of mass-casualty attacks this
month. In two of them, police said the perpetrators targeted
bystanders because of economic grievances.
    Officials at every level of China’s government have urged
increased scrutiny of financial disputes, including around
property and wages.
    China's top security chief, Chen Wenqing, this month urged
the leadership of all Communist Party committees to strengthen
security controls and ensure social stability in the coming
months. 
    
    GROWING DISCONTENT
    Helped by mass surveillance technology, China’s police and
security forces disperse any gathering quickly and sensitive
online discourse, including discussions of the recent attacks,
is swiftly censored.
    But officials do sometimes shift policy to address
grievances, for instance by abruptly ending COVID curbs in early
2023 or by compensating bank depositors after a fraud scandal in
2022.
    Some analysts anticipate Beijing could offer more economic
stimulus to improve household finances if social discontent
grows.
    China Dissent Monitor, a project by U.S.-based rights group
Freedom House, reported 826 protests triggered by economic
reasons in the third quarter, the highest number on record and
up 31% year-on-year. 
        Grievances included unpaid wages and undelivered
properties because of the failure of developers, the group said.
  
    Using dissent-tracking data and other inputs, Morgan Stanley
analysts have developed a "social dynamics indicator" to
identify pain-points for authorities.
    They see the indicator's plunge to seven-year lows as "the
key reason for the policy pivot in late September," when
authorities began rolling out monetary stimulus and measures to
support the property sector and indebted local governments.
    The analysts say the latest policies could lift their social
stability indicator in coming months, but warn it could drop
again later next year when returning U.S. President Donald Trump
is expected to raise tariffs on Chinese imports, inflicting more
economic pain.
    "A double dip in this indicator would increase the
possibility of consumption-centric" stimulus, Morgan Stanley
said in a note.
($1 = 7.2472 Chinese yuan renminbi)

 (Reporting by David Kirton in Shenzhen and James Pomfret in
Hong Kong; Editing by Marius Zaharia, Kevin Krolicki and Lincoln
Feast.)
 ((David.Kirton@thomsonreuters.com;))