After the housing market bubble burst in the city of Ordos in Inner Mongolia, which led to the liquidation of many of the city's residents' financial assets, people who funded the construction of the city have begun demanding a refund for their money from fundraisers, the Chinese-language Securities Times reports.
"The fundraisers invested the capital in the real-estate market and now the houses are unsellable. We bought a house at 6,000 yuan (US$990) per square meter but now its selling price is 4,300 yuan (US$709) per square meter," said a resident surnamed Wu, who lives on the west side of the Dongsheng district of Ordos.
Wu added that the developer was his relative so he had invested in the project in cash. His family thought they could make a profit after the houses were resold, but now the money is gone and the developer has pledged them two units, said Wu.
Wu's experience is common in Ordos, where wealth from the coal mining industry made the city the richest in China in terms of per capita GDP. A lot of people own several houses because fundraisers pawn houses and other assets as they are unable to pay back their debts in cash.
The newspaper reported that the collapse of private lending has also led to an increase in nonperforming loans at banks.
At the Ordos branch of Industrial and Commercial Bank of China, outstanding loans stood at 38.9 billion yuan (US$6.4 billion) at the end of 2013; and of this figure, the nonperforming loans were pegged at 762 million yuan (US$125.7 million), up by 595 million (US$98.2 million) compared with the beginning of 2013.
In addition, 3.3 billion yuan (US$545 million) was newly added to Ordos' outstanding nonperforming loans in 2013.
The main solution for the nonperforming loans is to turn to the borrowers or guarantors, but many people have resorted to court proceedings because the borrowers and guarantors are unable to pay them back despite court rulings.