Chinese property development giant Evergrande is not too big to fail

Chinese property development giant Evergrande is not too big to fail, the editor-in-chief of China’s state-run Global Times said.


Chinese property development giant Evergrande is not too big to go bankrupt, the editor-in-chief of China’s state-run Global Times said. This signals that neither the conglomerate nor investors should count on a bailout by the state.

https://www.dw.com/en/evergrande-why-the-chinese-property-giant-is-close-to-collapse/a-59175953

Evergrande, which is one of the country’s largest private conglomerates and the world’s most indebted property developer, is on the brink of bankruptcy after years of rapid growth.

Global Times editor-in-chief Chu Xijin wrote on WeChat on Thursday (Sep 16) that the conglomerate should look to the market for a bailout, not the government. This is the first statement by a representative of a state-owned media outlet questioning the government’s bailout of China’s second-largest property developer. Evergrande shares continued to fall for a fifth consecutive day on Friday as the market fears the group’s insolvency.

Evergrande has struggled to raise money to refinance debt and make payments to suppliers. Regulators have warned that the insolvency of the group, whose liabilities total $305 billion (259.3 billion euros), poses a risk to the entire Chinese financial system.

However, Chu Xin said the group’s possible bankruptcy is unlikely to cause a systemic crisis like the collapse of Lehman Brothers, as it is not a bank.

The Global Times is a nationalist tabloid published by the People’s Daily, the official newspaper of the Communist Party of China. Its views may not reflect official government positions.

However, Chinese officials have called on Evergrande’s big lenders to extend the group’s loans, and observers are increasingly convinced that direct government assistance is unlikely.