China says Evergrande risks are 'controllable' in first comments since debt crisis
- China's central bank on Friday said the ripple effects of the
EvergrandeGroup crisis that roiled global marketsare "controllable."
- They were China's first comments since Evergrande missed a series of international bond payments.
- Most recently, Evergrande missed the third round of interest payments on global bonds due Oct. 11.
A China central bank official on Friday said the ripple effects of the Evergrande Group crisis that have roiled global markets are "controllable." They were China's first comments since the property developer missed a series of international bond payments weeks ago.
Chinese authorities are containing the crisis based on "market-oriented and rule-of-law principles," according to Zou Lan, head of financial markets at the People's Bank of China, as reported by Bloomberg during a press conference on Friday.
"In recent years, the company failed to manage its business well and to operate prudently amid changing market conditions," Zou said, as reported by Bloomberg. "Instead it blindly expanded and diversified."
Zou added that the central bank has told lenders to keep the credit of the real estate sector "stable and orderly" as fears of contagion spilled over to the broader industry following a default by Fantasia Holdings, a luxury property developer that failed to pay $206 million in loans in October.
Still, he maintained that credit problems for property developers are normal market phenomenons. The central bank, he noted, has also encouraged property firms and their shareholders to fulfill their debt obligations.
Zou did acknowledge that Evergrande's breakneck expansion has "led to severe worsening of its financial metrics, and risks blew up in the end," Bloomberg reported.
Chinese officials, including the country's state-controlled media, have kept silent throughout Evergrande's fallout, barring the lone comment Friday.
Most recently, Evergrande, China's second-largest developer with 1,300 real estate projects in over 280 cities, missed its third round of interest payments on its international bonds this week due October 11. This caused China's bond markets to slip after some holders of Evergrande's US bonds with coupon payments said they have yet to receive them.
As Evergrande is entangled in a massive liquidity crunch, it's grappling with repayments to over 80,000 people holding around $6 billion worth of its wealth management products, including many employees.
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