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“We don’t expect the government to provide direct support to Evergrande,” S&P credit analysts said in a report released Monday. “We believe that Beijing would only be forced to intervene if there was a large-scale contagion causing the failure of several major developers and posing systemic risks to the economy. “
“The failure of Evergrande alone would lead to little chance in such a scenario,” they added.
Evergrande is the most indebted developer in the world and has accumulated around $ 300 billion in debt. He is due to make a number of interest payments for his bonds starting Thursday. S&P said “default is likely” on these payments.
“We believe the Chinese banking industry can digest an Evergrande default without significant disruption, although we are mindful of potential spillover effects,” S&P said.
The president of Evergrande tried to reassure the markets on Tuesday and said the company will shoulder its responsibilities to property buyers, investors, partners and financial institutions, Reuters reported on Tuesday citing local media.
“Not too big to fail”
“We don’t expect government actions to help Evergrande unless systemic stability is threatened,” S&P said. “A government bailout would undermine the campaign to bring greater financial discipline to the real estate industry. “
“The government is ready to help, but also wants events to take their course. Even in the home province of Evergrande, the developer is insignificant to Guangdong’s vast local economy – it’s not too big to fail.