Frustrated investors have approached government offices in Shenzhen, seeking updates on an investigation into Evergrande’s financial crisis, which has left them with significant losses. This grassroots effort reflects widespread discontent among middle-class Chinese citizens amid the ongoing bankruptcy proceedings of the heavily indebted real estate giant. As social tensions rise due to economic stagnation, the Chinese government is increasingly vigilant about maintaining stability, especially following recent protests related to economic grievances.
Investor Protests Amid Evergrande’s Crisis
In an unprecedented move, small groups of frustrated investors have approached three government offices in Shenzhen, seeking updates on an investigation initiated over a year ago, according to sources close to the situation. These individuals are hopeful that their actions won’t be interpreted as an unlawful public protest.
Although this grassroots effort is unlikely to impact the ongoing bankruptcy proceedings of Evergrande—an entity burdened with liabilities exceeding $300 billion—it highlights the deep-seated frustration among the middle-class Chinese populace who have seen their investments evaporate.
This cautious form of protest arises at a time when the Chinese government is acutely aware of the social tensions stemming from financial difficulties linked to the economic downturn. “If we don’t voice our concerns now, we may never get the chance again,” one investor, who requested anonymity for fear of repercussions from authorities, shared.
Background of the Real Estate Crisis
The real estate crisis that began in 2021 has significantly curtailed funding for local governments, homeowners, and businesses connected to a sector that historically represented a quarter of China’s economic output. In late 2021 and early 2022, disgruntled investors of Evergrande’s now-worthless wealth management products protested outside the developer’s offices after missing payments to contractors and creditors.
The recent protests organized by Evergrande investors mark the first large-scale demonstration since 2022. These actions were structured to navigate official channels for voicing complaints, thereby avoiding potential clashes with authorities, as per individuals familiar with the protests.
Over 500 former Evergrande investors participated in three separate demonstrations in Shenzhen. On Monday, one group visited the investigation office where Evergrande was based, followed by another group lined up at the city’s economic crimes office on Tuesday, and a third group at a city court on Wednesday. This strategic approach aimed to allow investors to engage with officials without triggering the appearance of a public protest.
Despite the inability of Reuters to confirm the exact number of participants, a journalist observed dozens gathering outside the investigation office on Monday and more near the court on Wednesday. The timing and locations for these actions were communicated to participants only on the day of the events, indicating a level of discretion among the investors who have maintained contact through small WeChat groups over the past two years.
“We must stay low-key and communicate face-to-face; otherwise, we risk being marginalized,” remarked one participant.
As of now, Evergrande and local authorities have not responded to requests for comments regarding these protests.
Escalating Social Tensions and Government Response
With enticing promises of a 12% return and luxury gifts like Gucci bags, over 80,000 individuals, including employees, invested in Evergrande’s wealth management products, contributing nearly $14 billion to the company’s coffers in five years preceding its collapse. In September 2021, the Shenzhen police reported arrests of some staff from Evergrande Financial Wealth Management Co., as part of an ongoing investigation into potential misconduct leading up to the developer’s bankruptcy.
The pressure from Evergrande’s investors comes at a time when the Chinese government is increasingly concerned about social unrest related to economic stagnation. Chinese officials regard social stability as crucial for the prosperity of the nation’s economy.
Discontent has surged recently following several violent incidents linked to economic grievances, prompting officials at various levels of government to call for a more rigorous review of financial disputes, particularly regarding wages and property matters. This month, top security official Chen Wenqing urged party leaders to enhance security measures and ensure social stability in the upcoming months.
Despite the Chinese government’s heavy surveillance and swift action to disperse gatherings, there are instances where policies are adjusted in response to public grievances. Such adjustments include lifting COVID restrictions in early 2023 and compensating bank depositors after a fraud scandal in 2022.
Experts suggest that if social discontent continues to rise, Beijing may introduce additional economic stimulus measures aimed at improving the financial circumstances of households. The China Dissent Monitor reported a record 826 protests related to economic issues in the third quarter, marking a 31% increase from the previous year, with grievances ranging from unpaid wages to undelivered real estate.
Using protest tracking data, analysts at Morgan Stanley have developed a “social dynamics indicator” to identify sensitive issues for authorities. They noted that the indicator’s drop to its lowest level in seven years was a primary catalyst for the recent policy shifts aimed at stimulating the economy and supporting the real estate sector and local governments.
Looking ahead, analysts predict that while new policies might temporarily elevate the social stability indicator, it could decline again in the following year due to potential economic pressures, including the possibility of increased tariffs on Chinese imports.
(1 $ = 7.2472 Chinese yuan renminbi)