Chinese Banks Try To Calm Fears About Evergrande's $310B Debt
Trying to dispel investor fears, some Chinese banks are disclosing what they are owed by a real estate developer that is struggling under $310 billion in debt and insist they can cope with a potential default, Joe McDonald reported for the Associated Press (AP).
Photo Insert: China Zheshang Bank in Shenzhen
The announcements came as Evergrande Group promised to talk with some individual investors in its debt. Other creditors waited to see whether Beijing will step in to oversee a restructuring to prevent financial disruption.
Evergrande’s struggle to meet government-imposed debt limits has prompted fears a default might disrupt the Chinese economy or global financial markets. Ratings agencies say a default is likely. Economists say Beijing can prevent a credit crunch in China but wants to avoid bailing out Evergrande while it tries to force companies to reduce debt levels.
Evergrande still has to deliver 200,000 housing units to buyers. CNN Business earlier reported that since the number of marriages is down, purchases of apartments have slid. One of Evergrande’s biggest lenders, Zheshang Bank Co., said it is owed 3.8 billion yuan ($588 million) and has “sufficient collateral.”
The overall risk is controllable, the bank said in a written answer to questions on a website run by the Shanghai Stock Exchange. It said a “risk situation ... will not have a significant impact” on the bank.
Others, including Shanghai Pudong Development Bank Ltd., gave no financial figures but said their lending was small, tied to individual projects, and secured by claims to land. The Pudong bank said it was in “close communication” with Evergrande.
Changshu Rural Commercial Bank Co. in the eastern province of Jiangsu said it is owed 3.9 million yuan ($600,000). The biggest state-owned commercial lenders including Industrial and Commercial Bank of China Ltd. didn’t respond to questions.
Evergrande was caught by stricter borrowing limits imposed on real estate last year by regulators who are trying to reduce surging debt levels the ruling Communist Party worries might drag on economic growth that already is in long-term decline.
Regulators have yet to say what Beijing might do, but economists say if the ruling party gets involved, it probably will focus on making sure families get apartments they already have paid for, rather than trying to bail out banks or other creditors.