Chinese real-estate giant Evergrande has started to repay investors in its wealth management business with property, as the world’s most indebted developer faces a key test this week.
Major banks have reportedly been told that they won’t receive interest payments on loans that are due Monday, while interest payments of $84 million on the firm’s bonds are also due on Thursday.
The company’s shares fell by more than 10% in Hong Kong trade on Monday.
The property giant’s deepening debt problems have triggered fears over the impact its potential collapse could have on China’s economy.
Evergrande grew to be one of China’s biggest companies by borrowing more than $300 billion.
Last year, Beijing brought in new rules to control the amount owed by big real estate developers.
The new measures led Evergrande to offer its properties at major discounts to ensure money was coming in to keep the business afloat.
Now, it is struggling to meet the interest payments on its debts.
This uncertainty has seen Evergrande’s share price tumble by around 85% this year. Its bonds have also been downgraded by global credit ratings agencies.
If Beijing does not lend a helping hand to Evergrande by all means it us severely going to impact China’s economy.
Individual, retail buyers who paid for real-estate upfront could lose their money, companies that do business with Evergrande — including construction and design firms, materials suppliers are at risk of incurring major losses which could force them into bankruptcy.