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December 6, 2021

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Impact from Evergrande’s woes unlikely

A CRUCIAL step has been taken in addressing the recent default of property developer China Evergrande Group after Guangdong provincial government held a regulatory talk with its chairman and agreed to send a working group to the company.

The risk resolution arrangements are conducive to comprehensively reviewing Evergrande’s debt scale and defusing risks, lowering uncertainties facing upstream and downstream firms and related real-estate companies, protecting the legitimate rights and interests of all parties and maintaining social stability, analysts said.

The provincial government of Guangdong in south China held a regulatory talk on Friday evening with Xu Jiayin, chairman of China Evergrande Group, and agreed to dispatch a working group to the company, at its request, following the property developer’s filing to the Hong Kong Stock Exchange that it may be unable to continue to perform its financial obligations.

China’s regulatory authorities released statements responding to the Evergrande default, saying it is an individual case and will have little impact on the market.

They attributed Evergrande’s risk to its mismanagement and blind expansion in diverse directions, noting that most property firms in China are focusing on and properly managing their main lines of business.

China’s real estate market has maintained sound development and the financing channels for real estate firms in the bond market continue to operate in a smooth and orderly way, the regulators said.

“Currently, the A-share market remains stable, resilient and active,” said the China Securities Regulatory Commission, stressing that the potential overflow effect of Evergrande’s risks on the stability of China’s capital markets is under control.

The steady recovery and sustained resilience of the Chinese economy, together with the efforts on ensuring the security of the country’s financial system, will also lay a solid foundation for addressing financial risks caused by an individual case.

The CSRC said regulators will continue to maintain the effective fund-raising function of the exchange bond market, support the normal financing needs of private companies, especially private real-estate firms affected by recent risk events, and ensure smooth channels for bond financing.


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