Evergrande, China's second-largest real estate developer, which faces over $300 billion in liabilities, told the Hong Kong Stock Exchange in a Friday filing that "in light of the current liquidity status...there is no guarantee that the group will have sufficient funds to continue to perform its financial obligations" and pay the $260 billion demanded by creditors, Reuters reported.
A backlash soon followed the company's statement, prompting China's government in its Guangdong province to summon Hui Ka Yan, Evergrande's chairman, according to Forbes, for a meeting later that night.
Hui, a Committee Member of the 12th Chinese People's Political Consultative Conference National Committee, added, according to Republic World, that there is "no guarantee" that the company would be able to meet its financial obligations.
Following the meeting, the Guangdong government agreed to send a "working group" to the company that would "oversee risk management, strengthen internal controls and maintain normal operations." According to Newsweek, the People's Bank of China would thereupon reassure that it could contain any collapse from Evergrande but would not guarantee that it would come in the form of a bailout.
"Evergrande's crisis is mainly a result of its own mismanagement and blind expansion," the PBOC stated. "The risks of individual companies won't affect normal market fundraising in the mid to long term."
Scott Kennedy, a trustee chair in Chinese business and economics at the Center for Strategic and International Studies (CSIS), told Newsweek in Oct. that trust in the PBOC is dependent upon the bank's intentions.
"If it's about reasserting the role of the state, across the economic system; if they give that message, then it's entirely believable" the bank could be trusted, Kennedy stated. But "if they're trying to provide reassurance that there can be a narrower range of assets that the state authorities guarantee, and that the market will take on a larger role for pricing risk and managing the complications from investments that go awry, I think that is ... that is a harder sell" that the bank could be trusted to contain the risk.
As of Saturday, the company is late on its payments of $82.5 million in coupons that were due on Nov. 6.
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