BEIJING (AP) — Global investors are watching nervously as one of China’s biggest real estate developers struggles to avoid defaulting on tens of billions of dollars of debt, fueling fears of possible wider shock waves for the financial system.
Chinese regulators have yet to say what they might do about Evergrande Group. Economists expect them to intervene if Evergrande and lenders can’t agree on how to handle its debts. But any official resolution is expected to involve losses for banks and bondholders.
The government “doesn’t want to be seen as engineering a bail out” but is likely to organize a debt restructuring to “reduce systemic risk and contain economic disruption,” Tommy Wu of Oxford Economics said in a report.
Evergrande is the biggest casualty yet from the ruling Communist Party’s effort to rein in surging debt levels. Investors are watching how the developer headquartered in the southern city of Shenzhen near Hong Kong handles an interest payment due Thursday on one of its bonds.
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