Xi faces unaccustomed headwinds in 3rd term bid

Chinese President Xi Jinping's plans to give himself an unprecedented third term at the 20th Congress of the Chinese Communist Party (CCP) later this year face more turbulent headwinds than expected, although few think he will be thwarted.

Nonetheless, Xi is facing a massive mortgage boycott from bilked Chinese homebuyers, protests over bank deposit freeze in Henan province, rising protests against the Covid-19 crackdown which has driven down gross domestic product growth to 4.5 percent and caused Beijing to miss its growth target for the first time in three decades, and potential domestic opposition.

"Xi Jinping will not only secure a precedent-breaking third term at the eagerly anticipated Party Congress this autumn, he will also be crowned 'people's leader' by the party, reported the pro-Beijing Hong Kong newspaper Ming Pao," tweeted Diana Choyleva, chief economist of Enodo Economics, a macroeconomic and political forecasting company in London, on July 21. "Not since Chairman Mao, and successor Hua Guofeng, has a party figurehead been given the official title of 'leader.' Whatever title he emerges with, expect China to remain Xi's China after the Party Congress," Choyleva tweeted.

It is clear from recent announcements of anti-corruption probes of many Chinese state organizations, however, that Xi is seeking to tamp down domestic opposition with an anti-graft campaign. On July 23, the website of China's two anti-corruption agencies, the Central Commission for Discipline Inspection (CCDI) and the National Supervisory Commission (NSC), announced the findings of inspections of 25 government bodies and state-owned companies. Ironically, the targets of the probes include the CCDI and NSC themselves.

Other targets include the Hong Kong and Macau Affairs Office and the Organization Department of the Chinese Communist Party, an important organ which exercises enormous control over the staffing of party personnel. The announcement of evidence of potential corruption has been referred to the relevant authorities. This indicates a high probability that some leaders will be arrested and charged.

One motive for such anti-graft probes of so many state organizations is to weed out people deemed disloyal to Xi, a China watcher told Asia Sentinel. Another purpose is to keep the party on its toes, especially with a major top-level personnel reshuffle at the 20th Party Congress, said the China watcher, who declined to be named. As Asia Sentinel also reported on July 11, recent criminal trials of two major figures, one of former Public Security Vice Minister Sun Lijun and the other of former billionaire Xiao Jianhua, were regarded as clearing the way for Xi's projected third term.

Mortgage strike

Earlier in July, many homebuyers in mainland China announced on social media their refusal to pay the mortgages on long-stalled apartments which were not yet completed and were due to be handed to them after completion. As the ongoing debt woes of Chinese property developers worsened, some developers were unable to complete and deliver properties to buyers.

"The development more likely reflects prolonged and widespread distress in the property-development sector, which drove the suspension of construction at a number of pre-sold housing projects," said a report by Fitch Ratings on July 18.

A rise in the number of Chinese homebuyers ceasing mortgage payments on properties where construction has been suspended for a prolonged period could weaken banks' asset quality, said Fitch, adding that failure of policy intervention to restore homebuyer confidence could test the banking system's resilience and heighten liquidity pressure on developers.

"Investors' biggest fear has been that a mass default on mortgages will lead to a banking system collapse," said a July 20 report by Morningstar, a US financial services firm, "More than 100 real estate projects across 19 provinces and municipalities are reportedly exposed to mortgage defaults,"

China Evergrande Group has been in a slow-motion slide toward disaster for months, with 34 projects facing defaults, said Morningstar. Evergrande was once the biggest Chinese developer by revenue and is now the world's most indebted property firm with an estimated US$300 billion in debt. The Hong Kong-listed firm defaulted last December.