China’s Evergrande bankruptcy filing an expected part of debt restructuring plan, unlikely to have contagion effect on economy: Observers

The property sector accounts for roughly a quarter of China’s economy.

Evergrande was once the country’s top-selling developer, but has become the face of China’s property sector debt crisis, after falling into a liquidity crisis in the middle of 2021. It is currently the most indebted property developer globally, with over US$300 billion in debt.

PART OF RESTRUCTURING PLAN

Experts told CNA that the bankruptcy filing is part of a debt restructuring plan rather than a signal of wider financial turmoil.

Mr William Ma, chief investment officer of GROW Investment Group, told CNA’s Asia Now on Friday that the filing was “not totally surprising”, and noted that there is currently a rebound and positive stock performance in the property sector.

“If we wind the clock back a little bit, actually Evergrande kind of suspended its equity trading since March last year, to buy time for the debt restructuring,” he said.

He said the company has been undergoing a debt restructuring plan since March this year, and also announced its earnings a few weeks ago.

“Filing Chapter 15, from my perspective, is part of the restructuring process. And actually this is positive news from a broader perspective because they are dealing with it in a global institutionalised way,” said Mr Ma.