China Evergrande crisis caused by ‘poor management’, but an exception in healthy property market, central bank says
- China’s central bank says property developer Evergrande Group failed to act judiciously in the face of changing market conditions
- But it stressed China’s property sector is healthy overall and any ‘spillover to the financial industry is controllable’
The comments from Zou Lan, head of the financial department at the People’s Bank of China (PBOC), come amid heightened market concern about worsening debt problems in China’s property market, which has for decades been a main engine of growth in the world’s No 2 economy.
Fears about a fast-spreading contagion in the US$5 trillion property sector have sparked a sell off of bonds from Chinese developers, while US Secretary of State Antony Blinken said earlier this month that China must “act responsibly” in addressing the potential economic impacts of Evergrande’s demise.
China’s financial regulators under the watch of the central bank are drawing a distance from Evergrande, after a high-profile crackdown on the nation’s most profligate leveraged asset buyers in 2017, including Anbang Group, Dalian Wanda Group and HNA Group, but which mostly left Evergrande off the hook except for a rap on the knuckles for its wealth management unit.
It had poor management in recent years. It failed to run its businesses cautiously according to changes in market conditions, but expanded blindly
As the developer built up most of its borrowings over the past five years, the financial regulators are being asked how Evergrande came to amass almost the equivalent of 2 per cent of the entire nation’s debt.