A senior official from the People’s Bank of China (PBOC) has sought to reassure market concerns about the potential impacts of Evergrande Group’s ongoing debt crisis.
Zou Lan, PBOC’s head of financial markets, said at a recent briefing that the broader impacts of Evergrande’s debt problems can be contained, as individual financial institutions were not subject to high levels of concentrated exposure.
Evergrande, which has USD$300 billion in debt, recently missed out on its third round of interest payments for offshore bonds, triggering widespread speculation about systemic risk implications. The property giant has 1,300 real estate projects in over 280 Chinese cities.
“This short-term extreme reaction is a normal market phenomenon,” said Zou.
Zou said Chinese authorities are urging Evergrande to accelerate its disposal of assets and its resumption of projects, and have flagged the provision of financial support.
“In recent years, this company did not operate and manage itself well,” said Zou. “It failed to conduct prudent operations according to changing market conditions, and it blindly diversified and expanded its business.”
Zou’s remarks are some of few made by Chinese officials or state-owned media on the matter of Evergrande’s recent debt difficulties.
The PBOC official further said that a heating up of some urban property markets in China earlier this year had prompted measures to contain the issuance of personal mortgages.
“Once housing prices stabilise, the supply and demand of mortgages in those cities will be normalised too,” said Zou.