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Reserve Bank of Australia Guy Debelle hopes China won’t let the Evergrande teach debt lessons

One of Australia’s most powerful bankers is confident that the Chinese government will prevent Evergrande from teaching other real estate developers lessons about unsustainable debt.

Evergrande owes investors more than $ 400 billion and is struggling to pay $ 110 million worth of annual interest this week.

Collapse ChinaAustralia’s second-largest real estate developer will have a significant impact on Australia as Australia is a major purchaser of Australian iron ore used in the manufacture of steel.

Guy Debelle, Deputy Governor of the Reserve Bank of Australia, said the collapse of the Evergrande Group, founded in 1996, was a real possibility and the Chinese Communist Party government did not try to save it.

“My assessment is in the hands of the Chinese authorities on how this evolves,” he told the House of Representatives Economic Committee.

“That’s what we spend a lot of time on.

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One of Australia’s most powerful bankers is confident that the Chinese government will not teach Evergrande about unsustainable debt to other real estate developers (pictured is Shanghai’s Evergrande Center). )

“Their default tolerance is higher than it was a few years ago.

“They are willing to see some defaults with limited results, perhaps in a way that they didn’t go back a few years ago.”

Dr. Debel said China wants to teach the real estate sector lessons about the risk of over-borrowing.

“Your back isn’t always covered,” he said.

“Controlling defaults can provide everyone with a useful lesson that risk pricing needs to be set a little better.

“It’s a shift rather than” I don’t want anyone to lose money under any circumstances. ” There was a change in that way of thinking. “

Credit rating agency S & P Global’s prediction that China will fail caused a big sellout on Tuesday night as investors worried about an excess of unfinished apartments.

Evergrande’s subsidiary, Hengda Real Estate Group, signed an interest payment agreement with bondholders on Wednesday, which did not completely prevent the collapse.

Guy Debelle, Deputy Governor of the Reserve Bank of Australia, said the collapse of the Evergrande Group, founded in 1996, was a real possibility and the Chinese Communist Party government did not try to save it.

Guy Debelle, Deputy Governor of the Reserve Bank of Australia, said the collapse of the Evergrande Group, founded in 1996, was a real possibility and the Chinese Communist Party government did not try to save it.

In the news, Bitcoin rose 4.8%, returning to about $ 60,000 for the first time since Monday, when Evergrande passed the bond payment deadline.

The price of iron ore has risen above $ 100 after falling below its benchmark on Sunday for the first time since July 2020, but is still half the $ 200 level in July 2021.

Evergrande shares surged 32% during Thursday’s Asian trade after Xu Jiayin promised wealth investors that real estate developers would resume construction activities as the bond coupon payment obligations approached on Thursday.

Shares plunged 85% in 2021, but Thursday was the largest one-day rise since its listing in 2009, according to Reuters analysis.

The Chinese Communist Party government is reluctant to rescue the Evergrande Group at this stage as it cracks down on over-borrowing under the new “three red lines” policy.

President Xi Jinping has also embarked on the promotion of “common prosperity”, causing millionaires to return me to the state.

Dr. Debel said China wants to teach the real estate sector lessons about the risk of borrowing (pictured is Shanghai's Evergrande Center Building).

Dr. Debel said China wants to teach the real estate sector lessons about the risk of borrowing (pictured is Shanghai’s Evergrande Center Building).

Liberal MP Tim Wilson, chair of the Economic Commission, said the potential collapse of the Evergrande Group caused problems with China’s banking system, describing its debt problems as an “earthquake.”

“It could raise greater questions about the credibility of Chinese banks,” he said.

In August 2020, China introduced three redline policies to address the huge debt of the real estate sector that came into effect this year.

This empowered the Chinese government to limit the increase in debt if the ratio of debt to the developer’s assets is high.

Dr. Debel likened the existence of Evergrande to China’s ability to manage crises involving state-owned enterprises.

“Looking at how countries have dealt with these financial problems in the past, we often see failures that can have serious consequences,” he said.

“I don’t know if this will happen this time, but it’s possible.

Liberal MP Tim Wilson, chair of the Economic Commission, said the Evergrande case raised questions about China's banking system.

Liberal MP Tim Wilson, chair of the Economic Commission, said the Evergrande case raised questions about China’s banking system.

“I mean, if you have a lot of balls in the air, you might drop them from time to time.

“Chinese people see this full-time.”

During times of financial market volatility, gold has traditionally been considered a safe investment, like government bonds and benchmark currencies such as the US dollar and the Japanese yen.

But Jeremy Ng, managing director of Singapore-based Gemini Trust Asia Pacific, said Australians are increasingly looking to cryptocurrencies for fear of inflation and slow economic recovery.

“Gold has historically been considered a safe asset,” he said.

“But Bitcoin and some other cryptocurrencies are experiencing rapid growth and offer unique and innovative features that make them stand out.”

Reserve Bank of Australia Guy Debelle hopes China won’t let the Evergrande teach debt lessons

Source link Reserve Bank of Australia Guy Debelle hopes China won’t let the Evergrande teach debt lessons

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