SINGAPORE: Singapore banks have “insignificant” loan exposures to debt-laden Chinese property giant Evergrande, said senior minister Tharman Shanmugaratnam on Monday (Oct 4).
He also said the exposure of Singapore’s banking system to the overall Chinese property sector “is not large”.
Direct exposures to China's property sector are less than 1 per cent of non-bank loans, said Mr Tharman in a written reply to parliamentary questions about the debt crisis surrounding Evergrande and whether it could impact Singapore’s financial institutions.
Exposures to Singapore property developers with operations in China are a further 2.5 per cent of loans to non-bank customers, Mr Tharman added. This includes all loans made to these developers, not just loans related to their Chinese operations.
Evergrande, one of China’s largest property developers, is struggling with more than US$300 billion in debt – an amount that makes it the world’s most indebted real estate company.
It has since stopped repaying some investors and suppliers, halted construction work at many home projects across China – a move that stirred panic and caused rare protests outside the company’s headquarters in Shenzhen last month.
Fears of a broader fallout on China’s property sector and beyond have also unnerved global financial markets.
In his written response, Mr Tharman also touched on the exposure of Singapore’s property developers to China.
“(The Monetary Authority of Singapore) estimates that about 30 per cent of their revenues in aggregate are derived from China. However, their median interest cover ratio, or ratio of earnings to interest expenses, is in aggregate more than three times," he said.
Singapore is also watching for any spillover impact on its economy due to the possibility of a growth slowdown in China.
“While the Chinese authorities have thus far maintained stability in their financial system, the slowdown in China’s real estate sector could dampen its GDP (gross domestic product) growth,” said Mr Tharman.
“It is difficult to estimate how significant this will be, and hence how adverse its impact will be on regional economic growth.”
He added that the MAS and the Ministry of Trade and Industry are keeping “a close watch” on any indirect or spillover effects on the Singapore economy arising from developments in China.