China’s cash-strapped developer Evergrande should use market capabilities to rescue itself rather than betting on a government bailout, Hu Xijin, chief editor of the state-backed tabloid the Global Times, has said.
In a commentary posted on his WeChat social media account, Hu said the state will not deliberately put enterprises in difficulties, and would help those that encounter normal headwinds.
“However, when the state needs to carry out standardized adjustment to an industry, it will not ‘spare the rat to save the dishes’ – or accommodate and protect an enterprise – just because its problems are serious,” Hu said.
It was the first commentary by a state media editor on the government’s position toward Evergrande’s potential bankruptcy, although the tabloid’s views do not necessarily reflect Beijing’s official thinking.
China’s slew of restrictions on property-related lending introduced last year have put pressure on Evergrande, which was already struggling with a debt crisis with sales growth slowing in recent years.
Hu did not think Evergrande’s potential bankruptcy would trigger a systemic financial storm like the collapse of Lehman Brothers because downpayment ratios on property in China were very high..
The developer, whose woes have been snowballing since May, released fresh warning of a possible default on Tuesday. Dwindling resources set against 2 trillion yuan ($305 billion) of liabilities have wiped nearly 80% off its stock and bond prices and an $80 million bond coupon payment now looms next week.
• By Iris Hong