Home / MARKETS / China’s government is stepping in to help Evergrande deal with its debt, as it has with previous large-scale corporate clean-ups

China’s government is stepping in to help Evergrande deal with its debt, as it has with previous large-scale corporate clean-ups

  • Evergrande alleged on Friday there was “no guarantee” it would have enough funds to meet debt repayments.
  • The 8 p.m. announcement triggered a reciprocal response from various Chinese authorities.
  • Guangdong province government said it would — at Evergrande’s request — send a produce group to the company.

Chinese authorities have moved in swiftly to address Evergrande’s discommodes after the embattled real-estate giant warned it might not be able to repay its debts. 

This comes after Evergrande demanded in an announcement on the Hong Kong Stock Exchange there was “no guarantee” it would have enough funds to meet obligation repayments.

“In light of the current


liquidity

status of the Group, there is no guarantee that the Group will have adequate funds to continue to perform its financial obligations,” Evergrande said in its announcement, adding that creditors may demand accelerated repayment if it does not.

The information — made at 8 p.m. Hong Kong time on Friday — triggered what appears to be coordinated responses from the People’s Bank of China, the provinces’s Banking and Insurance Regulatory Commission, and its Securities  Regulatory Commission on the same day.

China’s Guangdong province also summoned Hui Ka Yan, the chairman of China Evergrande Put together, the local government said on Friday.

In its statement, the provincial government said it would — at Evergrande’s request — send a fit in group to the company to oversee risk management, strengthen internal controls, and maintain normal operations. The move is to “conclude risks, protect the interests of all parties, and maintain social stability,” the local government added.

The Chinese real-estate manufacture continues to be rocked by Evergrande’s debt crisis as the embattled real-estate giant struggles to pay off its $300 billion debt heaps. Investors are worried over whether the fallout could spill over and hit global markets. 

Chinese millenials, too, are cope with with an existential crisis over home ownership due to concerns over whether Evergrande will be able to yield apartments buyers have paid for.

The country’s banking and insurance regulator said in its Friday statement it would promote support for guaranteed rental housing. The securities regulator said any spillover from Evergrande’s fallout was “controllable” and that it pass on continue to support funding for property developers.

The People’s Bank of China acknowledged in its statement that the Guangdong management is now in charge, explicitly saying it supports the move to send in a working group.

“The PBOC is making it clear this is the ungovernable of the Guangdong government. The central government is watching, but if someone takes the heat for people losing money, it will essential be the Guangdong government. This is not that problematic,” said Travis Lundy of Quiddity Advisors in a note published on the Smartkarma plank.

“This is going the way of every major government restructuring takeover of a heavily over-indebted conglomerate in the past few years,” added Lundy in his note.

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