China's Banking System facing a crisis

China's Banking System is now a facing crisis as it faces a surprise challenge from middle-class homeowners who are escalating boycotts on mortgage payments. （停贷）

These ordinary Chinese are watching their wealth slip away with a sustained slide in the property market and are accusing developers of failing to deliver apartments already paid for.

This may lead to a surge in the nonperforming loan in China's banking system. In order to prevent this, China may allow homeowners to temporarily halt mortgage payments on stalled property projects without incurring penalties as authorities race to prevent a crisis of confidence in the housing market from upending the world’s second-largest economy.

Authorities are ramping up efforts to backstop the real estate sector after mortgage payment boycotts snowballed in recent days. The turmoil stems partly from efforts by the Communist Party to rein in excessive real estate leverage and speculation. If the authorities are able to solve this issue, a crisis can be averted. If they fail to do so, China is just going to face a 1997 style of Financial Crisis which may trap China in the middle-income trap for years to come.

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