Jin Guanping
On December 3, Evergrande Group issued an announcement on the Hong Kong Stock Exchange stating that it may not be able to perform guarantee obligations for an overseas bond.
For a time, the Evergrande Group risk incident once again caused great concern in the market.
It must be emphasized that in the short term, the risks of individual companies will not affect the normal financing function of the medium and long-term real estate market, and the financing channels of real estate companies in the exchange bond market will remain smooth and orderly.
Next, the relevant departments will follow the principles of marketization and rule of law to supervise and promote enterprises' risk management, internal control management, etc., to maintain normal business operations, safeguard the legitimate rights and interests of housing consumers, and maintain the steady and healthy development of the real estate market.
The Evergrande risk event is a "case phenomenon" in the market economy and should not be overstated. However, it should serve as a warning to other real estate companies and once again emphasize the importance of sound operation.
The main reason for analyzing Evergrande’s risks lies in the poor management of the company itself, failing to operate cautiously in accordance with changes in the market situation, but blindly diversifying and expanding, which in turn caused the deterioration of operating indicators and financial indicators.
We must see that the fundamentals of my country's steady and positive economic growth have not changed. The real estate industry has maintained a healthy development as a whole. Most real estate companies stick to their main businesses and operate steadily.
On the one hand, recent domestic real estate sales, land purchases, financing and other behaviors have gradually returned to normal; on the other hand, some Chinese real estate companies have begun to repurchase overseas bonds, releasing confidence in their own development prospects, and some investors have also begun to buy The US dollar bonds of Chinese real estate companies have eased market tensions to a certain extent.
The market is generally concerned about two issues. First, what is the spillover effect of Evergrande's risk on the financial market?
Second, will Evergrande’s risks have a negative impact on the normal financing of other real estate companies and the entire real estate market?
In this regard, it is completely clear: First, the spillover impact of individual risks on the financial market is controllable.
Among the total liabilities of Evergrande Group, financial liabilities account for about one-third, and creditors are dispersed, have collateral, and the amount of financial investment is small. The risk exposure of a single financial institution is not large.
This shows that this will not have a negative impact on the normal operation of my country's financial market.
Second, the short-term risks of individual real estate companies will not affect the normal financing function of the medium- and long-term real estate market.
Since the beginning of this year, due to the rising risks of individual real estate companies, some banks have experienced short-term and excessive market reactions, and they have tightened credit funds for a time.
However, under the effective guidance of financial management departments, recently, real estate development loans for real estate companies have been restored in an orderly manner, and the reasonable funding needs of real estate companies have been supported.
In addition, housing loans for individuals have also been moderately adjusted.
Statistics from the People's Bank of China show that as of the end of October 2021, the balance of personal housing loans was 37.7 trillion yuan, an increase of 348.1 billion yuan that month, an increase of 101.3 billion yuan over September.
In the next step, the financial management department will continue to implement relevant national policies, and under the premise of implementing the prudential management of real estate finance, guide financial institutions to provide financial services to the real estate and construction industries.
In my country’s financing structure, bank credit occupies the dominant position. At this stage, it is necessary to focus on meeting the credit needs of first homes and improved housing in accordance with the different conditions in various regions, and rationally issue real estate development loans and M&A loans, and increase the investment in affordable rental housing. Support to promote the stable and healthy development of the real estate market.
Back to the Evergrande case.
At present, the People’s Government of Guangdong Province has agreed to send a working group to Evergrande Group. This is a powerful measure to promote enterprise risk management, supervise and effectively strengthen internal control management, and maintain normal operations in accordance with laws and regulations. It is conducive to further comprehensive inspections of the overall debt scale and effective resolution. Risks, safeguard the legitimate rights and interests of investors, owners and other parties, and maintain social stability.
Financial management departments and relevant financial institutions will also actively cooperate and participate in risk mitigation work.
At the same time, the financial management department will monitor market trends in a timely manner, strengthen penetrating supervision, and strengthen market communication and guidance.
For example, continue to maintain communication with relevant regulatory authorities in overseas markets, and urge overseas bond-issuing companies and their shareholders to strictly abide by market discipline and rules, properly handle their own debt issues in accordance with the principles of marketization and rule of law, and actively perform statutory debt repayment obligations .
There will be no change in the orientation of China's capital market towards marketization, rule of law, and internationalization. The good momentum of deepening reform and opening up will not change, but will only be strengthened.