Evergrande risk “controllable”, according to the central bank of the PRC

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The financial risks of China’s Evergrande group (恆大 集團) debt problems are “controllable” and unlikely to spread, the People’s Bank of China said on Friday, as investors increasingly fear the crisis not spill over to other developers.

Evergrande is the most indebted developer in the world, with more than $ 300 billion in liabilities. The company missed a third round of interest payments on its offshore bonds last week, scaring investors around the world and raising concerns that other companies in the industry could default as well.

“Of the total liabilities of Evergrande Group, financial liabilities represent less than a third. Creditors are also relatively dispersed and individual financial institutions have little exposure to risk, ”deputy head of the central bank’s financial markets department Zou Lan (鄒 瀾) said at a press briefing. “Overall, the risk of spillovers to the financial sector is controllable.”

Photo: Reuters

Evergrande has come under pressure after the Chinese Communist Party ordered real estate developers to reduce their debt levels. The authorities are trying to steer the industry towards a more sustainable pace of development after many years of growth fueled by stimulus measures.

Zou said Evergrande has been “mismanaged” over the past few years and “has not performed cautiously” in light of changing market conditions.

Instead, the company has diversified and grown blindly, which has affected its operations and finances, he said.

“The real estate industry is generally healthy,” Zou said, adding that most real estate companies operate stably with financial indicators of health.

Zou’s comments broke the Chinese government’s silence on Evergrande, whose share price has plunged since its liquidity crunch was exposed, and the company halted trading in its shares earlier this month in waiting for a “major transaction”.

So far, details of this possible deal have not been announced.

The official said financial authorities and local governments are urging Evergrande to increase the divestiture of its assets and speed up the restoration of its construction projects to protect the interests of consumers, and that the finance department will provide financial support to the company. resumption of projects.

Earlier this month, Shenzhen-based real estate developer Fantasia Holdings Group (花樣 年 控股 集團) missed payment on a $ 206 million bond. Another Chinese developer, Sinic Holdings Group (新力 控股 集團), said in a Hong Kong Stock Exchange filing that it is likely to default on a $ 250 million bond due later this week.

Meanwhile, major Chinese developers have called on the government to ease its crackdown on the real estate sector, local media reported.

Senior executives from 10 companies called for a “moderate” easing of real estate policies at a meeting hosted by government-linked industry group China Real Estate Association, China Business News reported on WeChat.

The head of the real estate division of the Chinese Ministry of Housing and Urban and Rural Development was present, as well as companies such as Poly Developments and Holdings Group Co (保 利 發展 控股 集團), China Vanke Co (萬科) and Sunac China Holdings Ltd (融 創 中國 控股), the newspaper said.

Major demands from developers include stabilizing market expectations, supporting home buyers with real housing needs and land price adjustments, the report said, citing unidentified people with knowledge of the meeting.

The association confirmed in a statement that a symposium with developers took place in Beijing on Friday afternoon.

The companies briefed attendees on business operations in the first three quarters of this year and gave opinions and suggestions, he said, without further details.

A report on the Economic Observer Network on Saturday said the Housing Department is drafting rules to strengthen oversight of developers’ presale funds after various forms of corporate contraventions.

The report, which quotes an anonymous source close to the authorities, does not provide more details.

Bloomberg Supplementary Reports

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