New Delhi, (Asian independent) Beijing is intervening to prevent a disorderly collapse of indebted real estate group Evergrande, which could wreak havoc on the world’s second biggest economy, CNN reported.
Fitch Ratings had declared on Thursday that the embattled property developer has entered “restricted default”, reflecting the company’s inability to pay overdue interest earlier this week on two dollar bonds. The payments were due a month ago, and the grace periods lapsed on Monday.
Evergrande’s apparent failure to pay that interest has revived fears about the future of the company, which is reeling under more than $300 billion of total liabilities, the report said.
Evergrande is massive — it has about 200,000 employees, raked in more than $110 billion in sales last year, and owns more than 1,300 developments in more than 280 cities — the report said.
Analysts have long been concerned that a collapse could trigger wider risks for China’s property market, hurting homeowners and the broader financial system. Real estate and related industries account for as much as 30 per cent of China’s GDP, the report added.
Chinese authorities have so far downplayed the prospect of spillover risks.
“China’s leadership is attempting to play it cool, but the circumstances surrounding Evergrande’s downward spiral raises serious questions about [Chinese President] Xi Jinping’s stewardship over China’s rapidly cooling economy,” said Craig Singleton, an adjunct fellow in the China Programme at the Foundation for Defense of Democracies, a research institute based in Washington D.C, the report said.
There’s already plenty of evidence that Beijing is taking a leading role in guiding Evergrande through a restructuring of its debt and sprawling business operations.
The local government in Guangdong province, where Evergrande is based, had said late last week that it would send officials to the firm to oversee risk management, strengthen internal controls and maintain normal operations, the report said.
