As China deals with a mortgage boycott from citizens angry that construction is stalled on the homes they took mortgages out on, a new threat has emerged on the horizon. Now suppliers and contractors who took out loans to complete projects for major developers like Evergrande are saying since they are not being paid for the projects they did, they in turn are not going to pay back the loans which they took out to complete the projects.

A group of landscapers, sculpture-makers and construction companies who are owed fees from developer Evergrande just issued a joint statement on social media, noting they have “lost hope,” are “broke” and are now going to stop paying all loans and debts because they have yet to be paid.

The statement, addressed to the provincial banks and authorities in Hubei, went on, “We have been struggling for more than a year, we have sold our assets and cars, and have exhausted our credit cards to pay the bills. Evergrande should be held responsible for any consequence that follows because of the chain reaction of the supply-chain crisis.”

Currently Evergrande is struggling to reorganize under more than $400 billion in liabilities, leaving all of its creditors in limbo waiting for payments. In addition, other top developers such as Fantasia, Kaisa, and Sunac have all also defaulted on bond payments earlier this year due to liquidity issues, and it can be assumed they are not paying contractors either. In addition as they default on bond payments, they eliminate a major source of potential funding in the future.

The boycott movement began back in late June, with roughly 900 Jiangxi residents refusing to pay their mortgage payments until developers completed their homes. At that point, construction of their pre-sold apartments from the developer Evergrande had been stalled for over a year, while they continued to pay off the mortgages on apartments they feared they would never see.

Within weeks the boycott spread to 300 unfinished projects in over 90 different cities.

Rebecca Choong Wilkins, Asia politics and government correspondent for Bloomberg said, “The ripple-through effect of that is really vast, when you consider the sort of wider network, not just of homebuyers, but also suppliers and contractors who rely on this sort of ecosystem.”

Since then the Chinese government has proposed giving homebuyers a mortgage holiday, allowing them to stop payments until the delivery of their units without penalty. However there has not yet been any offer to address the interests of contractors.

In China, even beyond the effect on banks, experts say 70% of household wealth is held in real estate. Meaning any decline in the market will have profound effects on the self-perception of wealth of consumers, and by extension, consumer sentiment.

Betty Wang, senior China economist from ANZ Research said in an interview, “The latest development in the mortgage-repayment boycott is quite significant. It signals the downside risks in the property sector have shifted from supply-side factors to demand-side factors. Mortgages are regarded as the safest asset for Chinese banks as they do offer quite a good return.”

Ms. Wang noted that mortgages are vital to the health of China’s banks because they account for nearly 20% of outstanding loans in the banking system.

She added, “If we do have this issue developing much faster if not exploded, it will threaten the financial stability for sure. If the policymakers fail to address this issue quickly, it could develop further and evolve into a much bigger risk,” she said.”

According to Ms Wang, around 10% to 15% of home sales held by developers have defaulted over the past 12 months.

Meanwhile China’s property prices have been declining for the last 10 consecutive months. And the slump in the property sector has bled over into China’s broader economy, since the property sector accounts for roughly 30% of China’s GDP by some metrics. China’s GDP growth for Q2 slowed to just 0.4%. Many economists are now predicting yearly growth of GDP will come in at just 3%, well below the government’s 5.5% target. Meanwhile the jobless rate has risen to 19.3% for people aged between 16 to 24 years old.

And the mortgage boycott is not China’s only banking issue. Roughly a month ago, five banks in the rural provinces of Henan and Anhui illegally froze all cash withdrawals of depositors due to fraud and corruption, leaving thousands of customers without their funds, and triggering violent protests.

Now another banking challenge rises as it appears we are heading into a period of global economic contraction which will only place more stresses on all of the economic systems in the country.