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Taipei, Taiwan — A growing number of home buyers in China have seen their dream of moving into new homes dashed in the past year after a slew of bankrupt developers left behind millions of unfinished pre-sold properties.

Many of the buyers could do nothing but vent their anger and frustration on Chinese social media platforms such as Douyin, known internationally as TikTok, over what they called “rotting apartments” that represented their lifetime savings. Police are cracking down on protests.

The crisis of confidence in a sector that was once a reliable route to building wealth may threaten China’s growth and stability in 2024, experts say.

“Since the real-estate market has historically been a key driver of China’s economy, losing this momentum is expected to result in a long-term average economic growth rate below 5% starting in 2024,” Darson Chiu, a research fellow at the Taiwan Institute of Economic Research in Taipei, told VOA Mandarin in a written reply on December 14.

Among countless victims, a Douyin user from the Henan province in north-central China with the name, “The happy life in my rotting apartment,” posted a short video clip on December 1 showing a local project where construction was halted.

“It’s been a year, but my apartment remains unfinished. … I hope the construction of the building can be restarted soon so that I can move into my future home,” he said in the video. 

A victim in the Hunan province city of Changsha, identified only as Ms. Chen in a local TV news report, said in late 2022 that her family could barely make ends meet after paying the monthly mortgage of $700 (5,000 yuan).

 “If my unfinished property keeps rotting, I personally won’t have the courage to go on living,” said Chen.

VOA Mandarin has approached a dozen owners of unfinished homes on Chinese social media platforms Douyin, Xiaohongshu, known as RED outside of China, and Weibo, China’s microblogging site similar to X. None agreed to talk.

Two lawyers in Shanghai and Beijing who specialize in property disputes also refused to be interviewed.

The Beijing lawyer said the city’s Bureau of Justice has banned lawyers from talking to foreign press, citing “the class action’s sensitivity.” None of his clients wanted to talk to foreign press.

The China Dissent Monitor, a project of U.S. rights group Freedom House, has been tracking postings across Chinese social media and tallied 1,841 demonstrations linked to the property sector between June 2022 and September 2023. Final 2023 figures won’t be available until January, said Kevin Slaten, Taipei-based research lead with the China Dissident Monitor project.

Two-thirds of the strikes were staged by homebuyers over issues like project delays, contract violations and alleged fraud, while the others have been triggered by construction workers demanding unpaid wages, according to Slaten.

One-fourth of the housing protests saw police repression, which Slaten said is an underestimate, as piecemeal evidence can only be captured from those video clips.

But the trend toward silencing protesters shows the gravity of threat to China’s leader, Xi Jinping.

“As the dictator of such a centralized system and a person who’s tried to centralize power, he [Xi] definitely sees this as a threat to his vision, which is keeping economic development high, making sure that he can deliver this to people as a way to co-opt them and garner enough support among the public for the authoritarian system,” Slaten told VOA Mandarin by phone.

Ting Lu, chief China economist at Nomura, estimated in mid-November that $448 billion is needed to complete the homes pre-sold between 2015 and 2020 that remain unfinished projects, assuming an average construction progress of 50%, according to his research provided to VOA Mandarin. That represents roughly 20 million homes.

In one of his research papers dated November 27, Lu urged Beijing to “play the role of lender of last resort to save the property sector” or the crisis could endanger social stability at some point next year.

But Nan Li, a Shanghai-based finance scholar, disagreed, saying that the proceeds from the liquidation of builders’ assets after they file for bankruptcy should be prioritized to ensure the delivery of unfinished homes.

Li added that any government bailout will only indulge the developers’ appetite for over-leveraging.

The biggest firms with the worst debt woes “have made a mistake in exercising excessive leverage. There’s no reason for the government to bail them out,” Li told VOA Mandarin.  

Li noted that China’s property sector should learn from the experience of Guangdong province, where its problem of massive unfinished homes around 1997 was eventually solved in years after builders’ nonperforming assets were all restructured in a lawful manner and in line with the market mechanism.
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LOS ANGELES — Toymaker Basic Fun’s team that oversees ocean shipments of Tonka trucks and Care Bears for Walmart WMT.N and other retailers is racing to reroute cargo away from the Suez Canal following militant attacks on vessels in the Red Sea.

Suppliers for the likes of IKEA, Home Depot HD.N, Amazon AMZN.O and retailers around the world are doing the same as businesses grapple with the biggest shipping upheaval since the COVID-19 pandemic threw global supply chains into disarray, sources in the logistics industry said.

Florida-based Basic Fun usually ships all Europe-bound toys from its China factories via the Suez Canal, the quickest way to move goods between those geographies, CEO Jay Foreman said in a telephone interview from his Hong Kong office.

That trade route is used by roughly one-third of global container ship cargo, and redirecting ships around the southern tip of Africa is expected to cost up to $1 million extra in fuel for every round trip between Asia and Northern Europe.

Yemeni Houthis’ drone and missile attacks in the Red Sea to show their support for Palestinian Islamist group Hamas fighting Israel in Gaza have upended shipping plans.

Basic Fun is now working through the holidays to send toys from China to ports in the U.K. and Rotterdam via the longer route.

It is also diverting some goods bound for ports on the U.S. East Coast from the Suez Canal to the drought-choked Panama Canal, while switching others to the West Coast via the direct route across the Pacific Ocean.

“It’s just going to take longer and it’s going to cost more,” said Foreman, who added that rates for some China-U.K. freight have more than doubled to around $4,400 per container since the Israel-Hamas conflict began in October.

The Suez Canal situation remains fast changing, and shippers MaerskMAERSKb.CO and CMA CGM are moving to resume voyages with military escorts through the Red Sea.

The biggest impact likely will come over the next six weeks, said Michael Aldwell, executive vice president of sea logistics for Switzerland’s Kuehne + Nagel KNIN.S.

“You can’t flick a switch” and reorganize global shipping, said Aldwell, who expects the diversions to cause a shortage of vessel space, strand empty containers needed for China exports in wrong places and send short-term transport price indexes sharply higher.

According to estimates from freight platform Xeneta, it costs $2,320 to ship a 40-foot equivalent unit (FEU) container from the Far East to the Mediterranean “post escalation” versus $1,865 per FEU in early December. It costs $1,625 to ship an FEU from China to the United Kingdom “post escalation” versus $1,425 per FEU in early December.

These rates do not include “extra ordinary” risk surcharges and “Emergency Recovery Cost” that can be between $400 and $2,000 per FEU, Peter Sand, chief analyst at Xeneta, said. 

Scramble for space

As of Wednesday, nearly 20% of the global container fleet — or 364 hulking container vessels capable of carrying just over 2.5 million full-sized containers — had been set on a new course due to the Red Sea attacks, according to Kuehne + Nagel data.

Mitsui O.S.K. Lines 9104.T and Nippon Yusen 9101.T, Japan’s largest shipping companies, said their vessels with links to Israel were avoiding the Red Sea area and both companies were monitoring the situation carefully for next steps.

Vessel owners already have begun rationing the less expensive, contract-rate space they reserve for customers, said Anders Schulze, head of the ocean business at digital freight forwarder Flexport.

For example, he said, a customer who delivers five containers a month versus the 10 promised in their contract may only get five containers at contract rates. The remainder would be subject to expensive spot market rates.

This has set off a scramble to reserve space ahead of the early February deadline to get goods out of China before factories there close for the extended Lunar New Year celebrations, logistics experts said.

“Every single booking [out of China] now needs to be reconfirmed. The dates could change, the routing may change,” said Alan Baer, CEO of OL USA, which handles freight shipments for clients. OL has contracts with ship owners and is part of the rush to secure spots on ships.

Small shippers are most at risk of being elbowed out.

Marco Castelli, who has an import/export business in Shanghai, has been trying to rebook three containers of Chinese-made machinery components bound for Italy after the shipments were canceled due to the crisis.

“Transfer my situation to a large corporation and you get what’s going on,” he said.

Foreman at Basic Fun, which plans to have about 40 containers on the water before the Lunar New Year, said the company’s contracts with customers don’t include a way to recover the extra expense. “The price is fixed. [Most suppliers] are going to have to eat those costs.” 
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WASHINGTON — An influx of Chinese investors in Vietnamese supporting industries could cause domestic businesses to suffer from the competition, the president of the Vietnam Association for Supporting Industries warned.

Phan Dang Tuat’s statement came a week after Vietnam and China agreed to expand their trade cooperation during Chinese President Xi Jinping’s mid-December visit, during which the two countries signed 36 cooperation documents. Vietnam and China pledged to strengthen their cooperation in economic zones, investment, trade and other areas, said a joint statement issued on December 13.

According to economic experts, the agreements will open opportunities for Vietnam to attract high-quality direct investment from China.

But Tuat said the wave of Chinese supporting-industry firms arriving in the Southeast Asian country is concerning.

Supporting industries supply raw materials and components to manufacturers.

Tuat voiced his concern at the Ministry of Industry and Trade’s year-end conference on December 20, questioning the rapid and large-scale entry of Chinese firms into the market, according VN Express International, a Vietnamese newspaper.

Chinese supporting industry companies are flocking to Vietnam, swiftly forming large-scale components and parts production chains to export to Europe and North America, Tuat said.

“This is a huge concern for domestic supporting industry enterprises,” Tuat said, according to VN Express International.

China-U.S. trade war

Since then-U.S. President Donald Trump launched a trade war with China in 2018, many Chinese products have been found to be disguised or labeled as “Made in Vietnam” to avoid U.S. tariffs on goods imported from China, according to reports by Reuters.

The trade war has also encouraged Chinese firms to move their production to other countries, including Vietnam, to bypass U.S. tariffs.

Meanwhile, Tuat told the ministry’s conference that because of a lack of economies of scale, Vietnam’s domestic firms are grappling with expensive capital and high manufacturing expenses, making it difficult to compete with Chinese firms, according to Vietnam-based Tuoi Tre.

Vietnamese companies in 2023 saw a 40% drop in revenue partly because of fewer orders from major markets, such as Europe, according to Tuat.

He also said that Vietnam’s unusually high lending rates have undermined the nation’s supporting industry enterprises, which number about 1,500 companies. (Whereas Vietnamese firms are required to borrow from Vietnamese banks at rates of 10% to 12%, foreign investors can borrow abroad at significantly lower rates, according to reports by Tuoi Tre.)

Ha Hoang Hop, an associate senior fellow at Singapore-based ISEAS-Yusof Ishak Institute, told VOA: “This should serve as a wake-up call for Vietnam to speed up its supporting industries in order to catch up with Chinese competitors who are way ahead.”

There is reason for concern, Pham Chi Lan, former general secretary of Vietnam Chamber of Commerce and Industry, told VOA.

“But we need to face that fact and learn from the lesson in the past where foreign investors chose Chinese suppliers instead of Vietnamese for their production in Vietnam,” he said.

Semiconductors a potential boon

The U.S.-China trade war has led semiconductor investors to shift their focus to Vietnam, a potential boon for the Southeast Asian nation, according to Hop and Lan.

“The U.S. has included Vietnam in its ‘friendshoring’ network, and Vietnam should make the most out of this,” said Hop, referring to the practice of focusing supply chain networks in countries regarded as U.S. political and economic allies.

Experts said Vietnam is well-positioned to draw U.S. investors seeking to de-risk supply chain investments in China.

“The competition between the U.S. and China is getting intense when the U.S. is banning the export of some equipment and technology to China, and this is a great opportunity for Vietnam to be able to secure some deals,” said Hop, referring to the U.S. export ban on chipmaking equipment and rare-earth technologies.

Lan, who was an adviser to the late Vietnamese Prime Ministers Vo Van Kiet and Phan Van Khai, agreed with Hop.

“The U.S., Japan and European countries want Vietnam to be strong for their benefits instead of being weak and dependent on China,” Lan said.

Following an historic U.S.-Vietnam business summit in September that bolstered ties between the countries, Vietnam then elevated Japan into its circle of comprehensive strategic partners, on par with China, in November. Washington and Tokyo sought to upgrade ties with Hanoi to offset Beijing’s expansion of power in the region and reduce its dependence on Chinese supply chains, according to experts who spoke with VOA.

Announcing its new partnership with Vietnam, the U.S. State Department described it as a way “to explore opportunities to grow and diversify the global semiconductor ecosystem” that “will help create more resilient, secure and sustainable global semiconductor value chain.”

Vietnam is poised to expand into chip-designing and possibly chip-making as trade tensions between the United States and China create opportunities for the country, according to Lan and Hop.
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