- China's central bank hinted it will protect consumers as Evergrande faces another payment deadline.
- The PBOC said it commits to "safeguard the legitimate rights of housing consumers."
- The statement was made after the bank's third-quarter Monetary Policy Committee meeting.
China's central bank on Monday hinted it will protect consumers from Evergrande-related stress as another payment deadline looms for the debt-laden property developer on Wednesday, according to a statement posted on its website.
The People's Bank of China did not mention Evergrande in its announcement, which only consisted of one line about housing along and a commitment to make its monetary policy flexible, Reuters first reported Monday. The statement was made after the bank's third-quarter Monetary Policy Committee meeting.
Markets were rattled last week on fears that the fallout of a potential Evergrande default would reverberate across the globe. The beleaguered Chinese property developer missed a deadline to pay $83.5 million in interest on it dollar-denominated bond last week. Another $47.5 million coupon is due this week on a second dollar bond.
As Evergrande teeters on the edge of insolvency, many investors have wondered if the Chinese government would step in to help prop it up. Some sources said China is letting Evergrande sweat to make its case that Chinese companies need to better manage their finances, the New York Times reported.
But on Monday, the PBOC said it commits to "safeguard the legitimate rights of housing consumers." The Asian superpower, according to Teresa Kong, portfolio manager at Matthews Asia, has the financial tools to manage the situation if it takes a turn for the worse.
"We believe Evergrande's financial problems are highly unlikely to create a risk to China's financial system," Kong said in a note last week. "The company does have a large debt burden, but it is insignificant given the scale of China's financial system."
She pointed to two Chinese companies with similar debt burdens, Anbang and HNA, that were successfully restructured without spreading risk through the system.
"As in the past, we expect the government to take an active role in managing the restructuring of Evergrande to mitigate the risks, by ensuring that its current liquidity problem does not become an insolvency problem and a bigger crisis of confidence in the Chinese financial system," she added.
Evergrande, with $309 billion in liabilities, is the world's most indebted company. It is China's second-biggest property developer with over 1,300 real estate projects and 7.3 billion square feet of contracted land.