Wednesday , September 28 2022

Evergrande: Beijing says ‘manageable’ risks to financial system


It was published :

Beijing (AFP)

China’s central bank described the risks posed by real estate giant Evergrande’s debt to the country’s financial system as “manageable” on Friday.

China’s biggest backer is dragging a list estimated at around 260 billion euros, threatening the rest of the economy with a domino effect.

The group, which has begun to fully diversify in recent years, has struggled for several weeks to meet interest payments and flat deliveries.

“Overall, the risk of contagion to the financial system is manageable,” central bank official Zou Lan said, as quoted by local media.

“Authorities are urging Evergrande to step up efforts to divest assets and speed up the resumption of construction sites,” he said in a press briefing.

Recently, several contractors and suppliers complained that they were not paid. Some took their cases to court, construction sites were closed.

Evergrande was “very poorly managed”, diversified “blindly”, criticizing Mr. Zou.

In addition to real estate, the firm has invested in tourism, digital technology, insurance, healthcare… and also in electric cars.

Established in 2019, Evergrande Auto’s goal was to revolutionize the industry and compete with American Tesla.

The real estate sector has long been one of the engines of the Chinese economy, with millions of homes being built.

A frenzy, particularly triggered by the need for most Chinese access to property, is an almost imperative stage of social progress.

But faced with the swelling of debt in real estate, regulators have imposed “three red lines” on the industry, prudent rates aimed at reducing incentives’ borrowing.

Property sales and prices have slowed sharply in recent months as the most vulnerable have struggled to keep their operations afloat since then.

Last month, Evergrande acknowledged that it might not be able to meet all of its commitments, but claimed it was not on the verge of bankruptcy.

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