Advertisement

China readies for ‘possible storm’ over lingering Evergrande debt crisis: reports

Click to play video: 'Evergrande meltdown: Debt deal reached, but will it satisfy investors?' Evergrande meltdown: Debt deal reached, but will it satisfy investors?
WATCH: Evergrande meltdown: Debt deal reached, but will it satisfy investors? – Sep 22, 2021

Chinese authorities are asking local governments to prepare for the potential downfall of debt-ridden China Evergrande Group, the Wall Street Journal reported on Thursday, citing officials familiar with the discussions.

The move has been characterized as “getting ready for the possible storm” by the officials, according to the report.

The officials said local-level government agencies and state-owned enterprises have been instructed to step in only at the last minute should Evergrande fail to manage its affairs in an orderly fashion, the WSJ reported.

Read more: China Evergrande debt crisis has small-time investors worrying ‘it’s game over’

Local governments have been tasked with preventing unrest and mitigating the ripple effect on home buyers and the broader economy, the officials said, according to the report.

Story continues below advertisement

Evergrande, China’s second-biggest property developer, has US$83.5 million in dollar-bond interest payments due on Thursday on a US$2 billion offshore bond and a US$47.5 million dollar-bond interest payment due next week.

Both bonds would default if Evergrande fails to settle the interest within 30 days of the scheduled payment dates.

Click to play video: 'Stocks find some footing after Evergrande relief as Beijing residents say company’s woes won’t hurt wider economy' Stocks find some footing after Evergrande relief as Beijing residents say company’s woes won’t hurt wider economy
Stocks find some footing after Evergrande relief as Beijing residents say company’s woes won’t hurt wider economy – Sep 22, 2021

The company, which epitomized the borrow-to-build business model, ran into trouble over the past few months as Beijing tightened rules in its property sector to rein back debt levels and speculation.

Investors are worried that a downfall could spread to creditors including banks in China and abroad.

(Reporting by Sohini Podder in Bengaluru; Editing by Shounak Dasgupta)

Sponsored content