The think-tank of China’s State Council met with property developers and lenders in Shenzhen, a source with direct knowledge of the meeting said, amid intensifying worries over a liquidity crisis in the country’s property sector.
Participants at the meeting, which took place on Monday, included China Vanke, Kaisa Group, Ping An Bank, China Citic Bank, China Construction Bank and CR Trust, according to the source.
Investors are concerned about liquidity woes spreading in China’s property sector, with a string of offshore debt defaults, credit rating downgrades and sell-offs in some developers’ shares and bonds in recent weeks.
Stricken property giant China Evergrande Group has rattled global markets as it grapples with debt liabilities of more than $300 billion that investors fear could pose systemic risks to China’s financial system.
Some holders of offshore bonds issued by Evergrande did not receive interest payments reportedly due on November 6 until Monday evening in Asia.
Twice in October, Evergrande barely prevented catastrophic defaults on its $19 billion of bonds in international capital markets by paying coupons just before the end of the grace period.
Another such period ends on Wednesday, November 10, when more than $148 million in coupon payments initially due on October 11 must be paid. But on Tuesday, shares of Evergrande rose by up to 4% before ending 0.88% up at the close of trading in Hong Kong.
Kaisa Calls for Help
Meanwhile, Shenzhen-based Kaisa urged state companies at the meeting to help private firms improve liquidity through project acquisitions and strategic buys, the source said.
Vanke declined to comment. Kaisa and the banks who participated in the meeting did not immediately respond to requests for comment.
But in a statement on its official WeChat account late on Monday, Kaisa said it was taking measures to solve its liquidity issues and was consulting investors in wealth management products about better payment solutions.
The company said it was accelerating asset disposals in Shanghai and Shenzhen and using the proceeds for repayments, as well as accelerating its sales of existing properties.
“We sincerely ask investors to give Kaisa Group more time and patience,” it said late on Monday.
On Friday, shares of Kaisa and three of its units were suspended from trading one day after an affiliate missed a payment to onshore investors, as China’s snowballing property debt crisis jolts more developers.
Kaisa’s troubles come amid concerns about a broadening liquidity crisis in the property sector, with a string of offshore debt defaults, credit rating downgrades and sell-offs in the developers’ shares and bonds in recent weeks.
Kaisa has the most offshore debt coming due over the next year of any Chinese developer after embattled China Evergrande Group, which is reeling under more than $300 billion in liabilities.
Fed Warning
Meanwhile, the US Federal Reserve said on Monday that stresses in China’s real estate sector including from heavily-indebted Evergrande have the potential to impact the United States if they spread first to the Chinese financial system.
The central bank’s latest Financial Stability Report said the stresses could cause “a sudden correction of real estate prices” and impact the China’s financial system.
“Given the size of China’s economy and financial system as well as its extensive trade linkages with the rest of the world, financial stresses in China could strain global financial markets through a deterioration of risk sentiment, pose risks to global economic growth, and affect the United States,” the report said.
- Reuters with additional editing by Jim Pollard
This report was updated with additional content on November 9.
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