Financial stock exchange market display screen board on the street
China’s central bank said Friday that the risk of spillover from embattled property giant Evergrande to the financial sector was “controllable”, breaking its silence on the company’s debt troubles, state media reported.
Local authorities are “carrying out risk disposal and resolution work in accordance with the principles of rule of law and marketisation,” People’s Bank of China official Zou Lan said at a briefing, according to an outlet of the Xinhua state news agency.
Zou’s comments came amid growing concern that the cash crunch at Evergrande – which is struggling with more than $300 billion in liabilities – could lead to contagion for the wider Chinese economy.
The liquidity crisis came as the country’s real estate sector found itself under tightened scrutiny as well, with regulators announcing caps for three different debt ratios in a scheme dubbed “three red lines” last year.
“In recent years, the company has been poorly managed, and was unable to operate cautiously in accordance with changes in the market situation,” Zou said on Friday.
“Instead, it blindly diversified and expanded, causing the serious deterioration of operating and financial indicators, and eventually an explosion of risk,” he added.
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