China said the Evergrande Group’s issues constitute an individual case and it sees the real estate developer's spillover risks as manageable, according to an official Friday.
The indebtedness of the Evergrande Group is an individual case in China's real estate sector, which is generally sound, Zou Lan, an official with the People's Bank of China, said at a news conference.
The majority of Chinese real estate businesses are running steadily with positive financial performance, he said, according to state-run Xinhua news agency.
"Instead of operating prudently in response to market changes, Evergrande stuck to reckless expansion into multiple sectors in recent years. The poor management has worsened the developer's financial conditions, leading to the final outbreak of risks, according to Zou," Xinhua reported.
"The financial liabilities are less than one-third of the developer's total liabilities,” Zou said, stressing that “spillover risks on financial institutions are overall controllable," it added.
"Related authorities and local governments are mitigating the risks in a law-based and market-oriented manner and urging Evergrande to accelerate the disposal of assets and the resumption of halted construction projects,” said Zou, according to the report.
The Evergrande Group has $300 billion in liabilities that could default on its debt and cause millions of customers to lose deposits.
Investors have been worried whether Evergrande would default, which could then spill over to other Asian financial and real estate markets before turning to a global event, just like the US subprime mortgage crisis in 2007 led to a global financial meltdown one year after.
Evergrande most recently missed another payment on Oct. 11./agencies