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Spillover from China's property debt risks is controllable: State media

Spillover from China's property debt risks is controllable: State media

FILE PHOTO: An aerial view shows residential buildings at the construction site of Evergrande Cultural Tourism City, a China Evergrande Group project whose construction has halted, in Suzhou's Taicang, Jiangsu province, China October 22, 2021. Picture taken with a drone. REUTERS/Xihao Jiang

SHANGHAI: The spillover effect of Chinese real estate companies' debt default risks to the financial industry is generally controllable, state media said on Monday (Oct 25), as concerns continue to loom over China Evergrande Group.

The comment was published in a Xinhua question and answer piece on the Chinese economy, for which the news agency said it had interviewed "relevant departments" and "authoritative people".

The article, which did not directly name China Evergrande, said property companies were facing debt default issues due to poor management and a failure to adjust their operations to market changes.

"It should be understood that there will be clues if a property is likely to default on its debts, so the risk of spillover to the financial industry can be predicted," Xinhua said.

It also said the country will steadily advance real estate taxation reform.

Evergrande, deep in crisis with more than US$300 billion in liabilities, last week appeared to avert default with a last-minute bond coupon payment. On Sunday, it said it had resumed work on more than 10 projects in six cities, including Shenzhen.

Its woes have reverberated across the US$5 trillion Chinese property sector, which accounts for a quarter of the economy by some metrics, with a string of default announcements, rating downgrades and slumping corporate bonds.

Its debt crisis is also being widely watched by global financial markets concerned about broader contagion.

Source: Reuters/mi

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