THE GOVERNMENT will evaluate the health of Chinese contractors participating in the infrastructure program in the wake of the debt crisis engulfing property developer China Evergrande Group, Finance Secretary Carlos G. Dominguez III said.
“We are currently checking if any of the Chinese contractors involved in our ‘Build, Build, Build’ program will be negatively affected by the reported problems of Evergrande,” Mr. Dominguez told reporters Tuesday.
Evergrande is currently dealing with a debt load of $305 billion in debt and needs to make a payment of $83.5 million in interest for its March 2022 bond by Thursday. It also needs to make a $47.5 million payment by Sept. 29 on its March 2024 notes, according to Reuters.
Default fears are threatening to spread to the broader Chinese economy as well as international markets.
In a note Tuesday, research house Oxford Economics said it is not expecting the Chinese government to arrange a bail out for the company, though it will likely pursue a “managed restructuring of the firm’s debt to prevent disorderly debt recovery efforts, reduce systemic risk, and contain economic disruption.”
“If a restructuring plan along these lines works, we expect the implications for the overall economic and policy outlook to remain contained. However, financial conditions for the broader property sector will remain tense for some time, with some spill-over into wider financial sector stress,” it said.
Oxford Economics said a bigger financial and economic fall arising from the restructuring measures may, however, force China to ease on its stringent policies in the property sector and even for the broader macroeconomic policy to prevent the economy from experiencing a severe downturn. — Beatrice M. Laforga