China’s central bank official says the spillover effect of Evergrande’s debt problems is under control.
BEIJING (Reuters) – The impact of the China Evergrande Group’s debt problems on the banking system is controlled and the risk exposure of individual financial institutions is not high, a central bank official said on Friday.
At a briefing, Zoe Lan, head of financial markets at the People’s Bank of China (PBOC), said Chinese officials were urging Evergrande to dispose of the assets and restart the project.
Evergrande blindly diversified and expanded its business, Zhou said.
Last month, as Evergand’s debt crisis intensified, the PBOC said it would protect the legal rights and interests of home buyers.
In August, the central bank as well as the banking regulator said they had called Evergrande officials and asked them to properly handle their loan risks, and Zhou’s remarks on Friday were the central bank’s first public statement to the developer.
In response to the risk of some developers, the financial institution of the property companies has significantly decreased, leading to a significant reduction in debt to developers, he said.
“The risk posed by individual financial institutions to Evergrande is not very large and the impact of the leak for the financial sector is controlled,” he said.
Evergrande should increase asset disposal and resume construction of projects, and officials will finance the resumption of projects, he added.
Some lenders have been “misunderstood” about the central bank’s debt control policies, which has created financial stress for some companies as some new projects cannot get loans even after the companies repay the existing loans.
He said, “This short-term sharp reaction is a common occurrence in the market.