Dozens of investors in financial schemes issued by the China Evergrande Group protested outside the cash-strapped company's offices in Guangzhou Tuesday, with many worried that their returns would be sacrificed to keep real estate projects afloat.
The protestors shouted "Evergrande, return our money!" reprising a chant used by disgruntled investors and suppliers last autumn as the deteriorating financial condition of the company became apparent.
On Friday, Evergrande announced a dial-back of plans to repay investors in its wealth management products, announcing that each could expect 8,000 yuan ($1,256) per month in principal payment for three months starting in January, irrespective of when their investment matures.
Once China's top-selling developer but now reeling under more than $300 billion in liabilities, Evergrande had previously agreed to repay 10% by the end of the month when the product matured, without specifying an amount.
The change sparked investor fear that they won't get their money back.
"I think it's hopeless and I'm scared, but if we don't fight for our rights, that's worse," said a retired woman surnamed Du, who was among those outside Evergrande's offices in the southern Chinese metropolis, and said she had invested 1 million yuan in Evergrande wealth management products.
"The economy's not good at the moment, these are ordinary people and they need this money for kids, for supporting their parents," she said.
As of midday, about 60 of those protesting had been detained by security personnel.
Lured by the promise of yields approaching 12%, gifts such as Dyson air purifiers and Gucci bags, and the guarantee of China's top-selling developer, tens of thousands of investors bought wealth management schemes through Evergrande.
More than 80,000 people – including employees, their families and friends as well as owners of Evergrande properties – bought products that raised more than 100 billion yuan in the past five years, said a sales manager of Evergrande Wealth, launched in 2016 as a peer-to-peer (P2) online lending platform that originally was used to fund its property projects.
"We worry we will be sacrificed," said a 34-year-old protester who works in e-commerce and would only give her name as Sophie, for fear of reprisal from authorities.
"It's okay for younger people like me, we can still earn it back, but I’m worried about the older ones who put everything into this," she said.
Protesters and members of messaging groups of people, whom Evergrande owes money, have said they had been told by police not to cause trouble and had seen their chat groups blocked.
Sophie said police had taken her to the station four times since she joined the protests outside Evergrande's headquarters in the nearby city of Shenzhen in September.
"We don't know what happens to our money but we're expected to keep quiet. It's not right," she said.
In a new blow to its finances, Evergrande Group announced Tuesday it has been ordered to demolish a 39-building resort complex.
The developer gave no explanation but news reports said the government of Danzhou, a city on the southern island province of Hainan, found it was improperly built and violated urban planning law.
Evergrande's struggle to comply with tighter official restrictions on the use of borrowed money by China's real estate industry has prompted fears of a possible default and financial crisis. Chinese regulators have tried to reassure investors that any potential impact on financial markets can be contained.
Economists say Beijing can keep Chinese lending markets functioning normally in the event of an Evergrande default, which looks increasingly likely. However, they say Chinese leaders want to avoid sending the wrong signal by arranging a bailout at a time when they are trying to force companies to reduce surging debt levels.
Evergrande asked Monday for the trading of its shares in Hong Kong to be suspended pending the release of “inside information.” Trading resumed following Tuesday's announcement, gaining 7.6%.
The developer missed new coupon payments worth $255 million due last Tuesday, though both have a 30-day grace period.
As the list of Evergrande's unpaid creditors and suppliers continue to grow, the firm has set up a risk management committee with many members from state companies and said it would actively engage with its creditors.
The company gave no indication of the possible loss from the demolition of the buildings on Ocean Flower Island, a massive integrated resort development where Evergrande is said to have spent 81 billion yuan ($13 billion) to build over 60,000 homes.
It said other buildings on the island weren't affected by the order.
Evergrande warned last month it might run out of cash to keep up with debt payments and other obligations.
The company says it has 2.3 trillion yuan ($350 billion) in assets and 2 trillion yuan ($310 billion in debt), but it has struggled to sell assets fast enough to keep up payments to bondholders.
Construction of some projects was temporarily suspended after contractors complained they weren't being paid.
Tuesday's announcement said buyers in 2021 signed contracts to purchase property worth a total of 442 billion yuan ($70 billion).
Beijing tightened restrictions on developers last year in a campaign to rein in surging corporate debt that is seen as a threat to economic stability. The ruling Communist Party has made reducing financial risk a priority since 2018.
The Danzhou government's order said Evergrande’s project violated a national urban planning law. It said the government will organize demolition if the company fails to act.
The Hainan government ordered an investigation last year of Ocean Flower Island, a complex of hotels, an amusement park and other facilities, according to news reports. They said some building permissions were revoked and fines of 215 million yuan ($34 million) were imposed for planning and construction violations.
