China state council think-tank met developers, banks, says source, as debt woes mount

Investors are concerned about liquidity woes spreading in China's property sector. PHOTO: REUTERS

SHANGHAI/BEIJING (REUTERS) - A think-tank of China's powerful state council met real estate developers and banks in Shenzhen city, a source with direct knowledge of the meeting told Reuters, amid intensifying worries over a liquidity crisis in the country's property sector.

Participants at the meeting, which took place on Monday (Nov 8), 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.

Embattled developer China Evergrande Group, which is at the centre of the debt crisis, has rattled global markets as it grapples with liabilities of more than US$300 billion (S$404 billion), which, if not managed, could pose systemic risks to China's financial system.

At the meeting with the Development Research Center of the State Council, Kaisa urged state companies to help private firms improve liquidity through project acquisitions and strategic buys, said the source.

While the think-tank makes policy proposals, it is not a decision-making body.

Kaisa, China's 25th largest developer by sales, also said its liquidity is tight and it is facing significant difficulties amid rating downgrades and banks curbing loans, the source added.

The developer said some financial institutions had transferred funds out of its accounts inappropriately and it urged all lawsuits seeking a freeze of its assets to be handled centrally in a Shenzhen court.

Vanke, one of China's top three developers, said at the meeting its financials were healthy, although it called for stable policies in a bid to avoid systemic risks and a liquidity crunch.

Other companies attending the meeting were Southern Asset Management and developer Excellence Group, the source added.

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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.

Kaisa has the most offshore debt of any Chinese developer, after Evergrande. Last week, Kaisa and three of its units had their shares suspended from trading, a day after an affiliate missed a payment to onshore investors.

Some holders of offshore bonds issued by a unit of Evergrande had not received interest payments due on Nov 6 by Monday evening in Asia.

Twice in October, Evergrande narrowly averted catastrophic defaults on its US$19 billion worth of bonds in international capital markets by paying coupons just before the expiration of their grace periods.

One such period expires on Wednesday for more than US$148 million in coupon payments that had been due on Oct 11. Evergrande is also due to make coupon payments totalling more than US$255 million on its June 2023 and 2025 bonds on Dec 28.

Shares of Evergrande fell more than 1 per cent on Tuesday.

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