A sweeping clampdown on internet-technology companies by Xi Jinping, China’s president, has wiped out more than $1trn in shareholder value since early this year
This article was updated at 6am BST on September 22nd, to take account of Evergrande’s announcement that it would make a coupon payment the next day.authorities are honing a new skill: the “marketised default”—or an orderly market exit and well-managed restructuring for troubled companies. The term has surfaced in government documents and local media as of late, as regulators become adept at managing larger, more frequent and highly complex defaults. They have had some successes.
Hong Kong-traded shares in one large Shanghai-based group, Sinic Holdings, collapsed by nearly 90% on September 20th on fears that it, too, would fail to repay a bond due in October. R&F Properties, another highly indebted group, has said it will raise up to $2.5bn by borrowing cash from company executives and selling a property project. Several financial institutions with high exposure to the property sector have suffered falls in their market value.
When central-government regulators stepped up their campaign against leverage last August, the first major cracks began appearing in its business. Authorities have constricted developers’ capacity to continue accumulating debt, limiting liability-to-asset ratios to less than 70%, net debt-to-equity ratios to less than 100% and mandating levels of cash that are at least equivalent to short-term debt. The policy has changed the nature of the business.
Ping An Bank and Minsheng Bank, both hit by sell-offs in recent days, had 10.6% and 10.3% of their total loan books extended to property groups in the first half of the year. Minsheng has tight links to Evergrande. Shengjing Bank, which is majority-owned by Evergrande, is thought to have lent heavily to the property company. A banking crisis is not the base case for many investors watching the situation.
If Evergrande does default, there is still the possibility that the government may step in to help individuals. The state, which is likely to have been worried by protests in recent days by savers who have bought Evergrande’s wealth-management products, is expected to be forced to broker a partial bail-out for assets most connected with social stability. Such a process would be focused on the properties the company has already sold to ordinary people and which are not yet built.
Canada Latest News, Canada Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
China's Xi pledges to end funding for overseas coal power plantsChinese President Xi Jinping said Tuesday that his country would end support for building new coal-fired power plants abroad, a move that would cut off a key source of financing for the fuel most responsible for climate change
Read more »
China’s Xi Commits to Stop Building Coal Plants AbroadChinese President Xi Jinping said Beijing would stop building coal-fired power plants abroad, in a public commitment to redirect the country’s huge engineering industry away from adding to a source of global pollution
Read more »
IMF says China has tools to avoid Evergrande's problems becoming systemic crisisThe International Monetary Fund on Tuesday said it is closely following developments surrounding China Evergrande Group , but believes Beijing has the tools to prevent the situation from turning into a systemic crisis.
Read more »
World shares sink as China Evergrande fears spark risk offWorld stocks sold off sharply on Monday while safe-haven assets gained as troubles at property group China Evergrande fed concerns about spillover risks to the economy, sparking fresh investor worries ahead of a busy week of central bank meetings.
Read more »
Dollar holds gains, yuan under pressure as Evergrande risks growThe offshore yuan wallowed near an almost one-month low on Tuesday while the safe-haven dollar and yen stood tall as investors sought shelter from a potential China Evergrande default.
Read more »
Here's why the Evergrande crisis is not China's 'Lehman moment'Property developer China Evergrande's debt woes are unlikely to cause the same fallout as the collapse of U.S. investment bank Lehman Brothers, analysts said.
Read more »