Evergrande crisis: Beijing not likely to let developer collapse even as it gets tough, analysts say
- The property developer has missed three interest payments and will default if it fails to pay US$119 million by October 23
- The government, which wants to avoid a bailout, is trying to find a way to penalise the company without creating a sectorwide panic, analysts say
Beijing will not likely allow property giant China Evergrande Group to collapse as the government devises a way to get tough on the company without inducing sectorwide turmoil, market analysts said at a conference on Wednesday.
Evergrande, saddled with more than US$300 billion in debt, has missed three rounds of interest payments in three weeks and will default on its debt if it fails to pay the combined US$119 million in interest before October 23.
“What the government is doing is this kind of a managed reconstruction” that is trying to “scare the property market” away from any further debt-fuelled growth by not bailing out Evergrande, said Andrew Collier, managing director of Orient Capital Research.
Collier’s remarks came during the China Institute Executive Summit (CIES) on Wednesday. The South China Morning Post is a strategic partner of the event.
“They are desperate to avoid a central government bailout,” Collier continued, adding that he didn’t think China’s central bank “wants to have its face on the picture of helping out the property market”.
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Angry protest at headquarters of China Evergrande as property giant faces liquidity crunch
On the other hand, Beijing is also trying to contain the potential fallout that an Evergrande failure might cause, he said. The government is “actually telling the banks to start to release a little bit of cash to the property market to soften the blow”.
