Evergrande debt risks 'controllable'

Developer's woes not affecting economic stability, experts say

Risks resulting from China Evergrande Group's debt problems are currently controllable and will not affect the overall stability of the nation's economy, experts said on Thursday.

The comments came on the heels of the latest announcements made by the company on its financial troubles.

Evergrande Real Estate Group Ltd, a main arm of Evergrande, said in a statement late Tuesday that as of the end of September, its unpaid debts totaled approximately 280.83 billion yuan ($38.37 billion), with its overdue commercial bills standing at 206.08 billion yuan.

On Monday, the developer said that the High Court of the Hong Kong Special Administrative Region has further postponed the hearing of its winding up order to Dec 4.

Li Peijia, Bank of China's senior analyst and team leader of finance researchers, said Evergrande's embattled debt position, though worrying, could be eased if its large number of physical assets and affiliated companies are handled smartly.

"Risks stemming from the company facing China's financial system are mostly measurable and controllable," Li said.

Business profile and potential spillover risks in the case of Evergrande are very different from those in Western countries, she said, adding that the company has few derivative financial products and its total liabilities account for a low percentage of China's overall bank loans.

Li said if the developer can manage its assets well in the future, debt woes can be alleviated to some extent.

However, Li warned that the developer's debt situation may affect upstream and downstream relevant market entities. Players concerned in this case should remain vigilant and conduct risk management accordingly.

The recently concluded central financial work conference urged for measures to promote a virtuous cycle between the finance and real estate sectors, including a better regulatory system for real estate enterprises and fund management, macro-prudential management of real estate finance, and equal treatment for different types of real estate enterprises in meeting their reasonable financing needs.

City-specific targeted policies should be adopted to better support both rigid housing and housing improvement demands, the conference statement said.

Zhao Xiuchi, head of the Department of Land Resources and Real Estate Management at the Capital University of Economics and Business, said she expects China to accelerate the establishment of a virtuous cycle in the real estate sector by introducing more policies and exploring possible methods, as many Chinese property developers are facing liquidity stress due to the recent adjustments in China's property market policies.