Friday 17 September 2021 7:36 am

China's Evergrande should not bet on a government bailout, says state-backed editor-in-chief

China’s Evergrande, which is battling $300bn in liabilities, should not bet on a government bailout on the basis that it is ‘too big to fail’, the editor-in-chief of a local newspaper has said.

The comments from Hu Xijin, from state-backed Global Times, come as Evergrande’s shares nosedive for a fifth consecutive day amid fears of its collapse, Reuters first reported.

Evergrande, China’s second largest property developer, has been racing to gather funds to pay its lenders, suppliers and investors – but has warned regulators that its $300bn-deep debt could have risks for the country’s financial system.

Xijin said on his WeChat social media account yesterday that the property giant should turn to the market, and not the government, if its wants to be hoisted out of its debt obligations.

The newspaper editor added that the businesses’ bankruptcy was unlikely to trigger major economic turbulence due to it being a real estate group and not a bank – and because down payment ratios in China’s property market are very high.

Despite this, the group’s current lack of confidence and funds is reportedly bruising the yuan and Chinese assets more broadly.

Local policymakers have called on Evergrande’s major lenders to extend interest payments and rollover loans, as onlookers suspect a government bailout is increasingly unlikely.

Evergrande, which has more than 1,300 real estate projects, is also due to pay an additional $83.5m interest on 23 September for a March 2022 bond, while another $47.5m interest is due just days later for a March 2024 bond.

The bonds will both default if the property giant fails to pay the interest within 30 days.

The property giant admitted earlier this week that it was under “tremendous pressure”, not even a year after its $1.8bn Hong Kong stock exchange float.

The hefty debt pile follows years of borrowing to fund its rapid expansion.  

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