China's crisis-hit Evergrande says deal has been reached to avoid default

WION Web Team
New DelhiUpdated: Sep 22, 2021, 08:38 AM IST

Evergrande-China's largest property group by sales Photograph:(Reuters)

Story highlights

It is feared that Evergrande crisis would spill over to global economy and start a fresh financial crisis

Troubled Chinese housing giant Evergrande said on Wednesday that it has agreed a deal with domestic bondholders that may allow it to avoid default on one of its interest payments.

Evergrande's property unit Hengda said in a statement to the Shenzen stock exchange that a plan to pay interest worth 232 million yuan (USD 35.9 million) had been negotiated. There was no mention of its repayments on interest for an offshore bond.

All eyes are on Evergrande's interest payment as there are fears that default would start a global crisis which would further weaken global economy battered due to coronavirus pandemic. Payment of interest is due on Thursday (September 23)

Fears of Evergrande default have sent markets tumbling across the globe in last few days. On Tuesday,  Dow lost  1.8 per cent and the S&P 500 index fell 1.7 per cent.

Evergrande is second-biggest property firm in China. It has more than USD 300 billion debt. Since real estate accounts for more than a quarter of China's GDP, is feared that Evergrande's collapse would spill over to global economy and start a fresh financial crisis. This is undesirable given the current state of recovery from Covid pandemic.

The crisis has triggered rare protests outside the company's offices in several Chinese cities by investors and suppliers demanding their money, some of whom claim they are owed as much as $1 million.

The crisis sent shares in the firm diving around 17 percent Monday, leaving it down around 90 percent from the start of the year.