PBOC: "Hengda Risk, Financial Contagion Possibility Is Controllable"

[Image source=EPA Yonhap News]

[Asia Economy Reporter Kim Yuri] Chinese authorities have expressed that concerns about the market spread of the Evergrande Group crisis are "controllable in terms of the possibility of the Evergrande issue spreading throughout the financial industry."

According to the China Securities Journal on the 15th, Zhou Ran, Director of the Financial Market Department at the People's Bank of China, the central bank, made this statement while announcing the financial statistics data for the third quarter of this year in relation to the Evergrande Group crisis.

Director Zhou said, "The Evergrande issue is an individual phenomenon within the real estate industry," adding, "Through macro adjustments to real estate over recent years, land prices, housing prices, and expectations in the real estate market have been maintained stably." This means that most real estate companies have stable management and sound financial statements, and the real estate industry as a whole is healthy.

As of the end of June, Evergrande is known to have total assets of 2.38 trillion yuan (approximately 438 trillion won) and total liabilities of 1.97 trillion yuan (approximately 363 trillion won). Director Zhou stated that Evergrande's total assets exceed 2 trillion yuan (approximately 368 trillion won), of which about 60% are real estate development projects. It is assessed that Evergrande blindly expanded its business, which worsened management and eventually led to the risk materializing.

He said, "Less than one-third of Evergrande's total liabilities are financial liabilities, and creditors are dispersed," adding, "The risk to individual financial institutions is not significant." He continued, "Overall, the possibility of risk spreading to the financial industry is controllable."

Director Zhou mentioned that relevant institutions and local governments are currently working on risk resolution based on market-oriented and rule-of-law principles, urging Evergrande to dispose of assets and resume construction to protect consumers. He also explained that financial institutions plan to provide financial support for the resumption of construction.

This content was produced with the assistance of AI translation services.