Beijing (AFP)

A delicate but "manageable" situation: the abysmal indebtedness of the Chinese real estate giant Evergrande should not pose risks to the country's financial system, the central bank tried to reassure on Friday by breaking its silence.

One of the biggest promoters of China is dragging a slate estimated at nearly 260 billion euros, which threatens by domino effect the rest of the economy.

Despite a storm in financial markets in September, Beijing has yet to say whether or not it will come to the aid of the company on the brink of bankruptcy.

Evergrande, which has embarked on all-out diversification in recent years, has struggled for several weeks to honor its interest payments and apartment deliveries.

"Overall, the risk of contagion to the financial system is manageable," said senior central bank official Zou Lan, quoted by local media.

The authorities "urge Evergrande to increase its efforts to sell assets and speed up the resumption of construction sites," he said during a press briefing.

They "carry out the work of cleaning up and resolving risks in accordance with the rules of law and the market", added Mr. Zou.

Recently, several subcontractors and suppliers complained that they were not getting paid.

Some have taken their cases to court, while construction sites have been shut down.

Evergrande "has been very poorly managed", diversifying "blindly", which has resulted in "an explosion of risks", criticized Mr. Zou.

In addition to real estate, the firm has invested in tourism, digital technology, insurance, health ... but also the electric car.

Founded in 2019, Evergrande Auto had the ambition to revolutionize the sector and compete with the American Tesla.

It has not yet marketed any vehicle.

Evergrande is also known in China for its football club: Guangzhou FC (ex-Guangzhou Evergrande), coached for a time by Italian world champion Fabio Cannavaro.

- "Red lines" -

The real estate sector has long been one of the engines of the Chinese economy with the construction of millions of homes.

A frenzy stimulated in particular by the need of most Chinese to access property, an almost obligatory stage of social advancement.

But faced with the swelling of the debt in real estate, the regulators imposed on the sector "three red lines", prudential ratios which aim to reduce the recourse to the borrowing of the promoters.

The most vulnerable have since struggled to keep their activities afloat, while real estate sales and prices have slowed sharply in recent months.

Last month, Evergrande had acknowledged that he might not be able to honor all of his commitments but was denying himself that he was on the verge of bankruptcy.

Protest in front of Evergrande headquarters on September 16, 2021 in Shenzhen, southern China Noel Celis AFP / Archives

Dozens of looted owners and unpaid suppliers demonstrated last month in front of Evergrande's headquarters in Shenzhen (southern China).

At the end of September, the group was unable to honor loan repayments, totaling 131 million dollars (113 million euros).

And this month, Evergrande was unable to honor a third loan in the amount of $ 148 million (127 million euros).

However, the group has a 30-day grace period for each loan.

The deadline for the first payment is October 23.

But he will still have to repay his creditors some 28 million additional euros before the end of October.

© 2021 AFP