China central bank says Evergrande risks ‘controllable’x
BEIJING – China’s central bank has said the risk of spillover from embattled property giant Evergrande to the financial sector was “controllable,” breaking its silence on the company’s debt troubles, state media reported.
Local authorities are “carrying out risk disposal and resolution work in accordance with the principles of rule of law and marketisation,” People’s Bank of China official Zou Lan said at a briefing, according to an outlet of the Xinhua state news agency.
Zou’s comments came amid growing concern that the cash crunch at Evergrande – which is struggling with more than $300 billion in liabilities – could lead to contagion for the wider Chinese economy.
The liquidity crisis came as the country’s real estate sector found itself under tightened scrutiny as well, with regulators announcing caps for three different debt ratios in a scheme dubbed “three red lines” last year.
“In recent years, the company has been poorly managed, and was unable to operate cautiously in accordance with changes in the market situation,” Zou said.
Meanwhile, the Bank of Korea said China Evergrande Group’s troubles are unlikely to trigger a financial crisis given the low exposure of local banks to the debt-laden developer and the ability of Chinese regulators to control markets,
China’s government may provide liquidity to the company and help it proceed with ongoing construction projects, South Korea’s central bank said in a weekly report.
A recovery in the global economy will be positive for China and offset a potential shock from the debt crisis, the bank said. – BLOOMBERG NEWS.
