China has tools to avoid Evergrande crisis, AfDB chief says

TOKYO, Sept.28 (Reuters) – China has enough leeway and policy tools to prevent debt-ridden developer China Evergrande Group from triggering a global financial crisis, the Asian Development Bank president said on Tuesday. , Masatsugu Asakawa.

But Evergrande’s fate underscores the important role asset price inflation plays in China’s rapid growth, and there could be implications for regional governments’ finances and consumption, Asakawa said.

“I don’t think a single corporate episode would trigger a global crisis like the one caused by the collapse of Lehman Brothers,” Asakawa said in an online briefing.

Chinese authorities were showing readiness to contain any spillovers from the potential collapse of Evergrande (3333.HK) and the central bank was injecting ample short-term liquidity into the markets, he said.

Evergrande also had enough assets he could offload to make payments, he added.

The developer’s woes underscored the Chinese economy’s heavy reliance on the scorching real estate market that resembled Japan’s asset inflation bubble of the late 1980s to early 1990s.

A real estate crash could hit regional governments and Chinese households that have relied on real estate holdings to finance their debt.

“We need to carefully monitor developments as the impact on Chinese regional government finances and household spending is cause for concern,” said Asakawa, who was previously Japan’s top foreign exchange diplomat. .

With liabilities of $ 305 billion, Evergrande has raised concerns that its problems will spill over into China’s financial system and reverberate around the world – although the damage has so far been concentrated in the real estate sector.

Asakawa said China is likely to resume moderate growth from 2022 with structural problems such as rising private and public sector debt weighing on its economy.

“From 2022, China will follow a moderate long-term growth trend. It will not return to the 7-8% expansion rate seen during its period of strong growth,” he said.

Reporting by Leika Kihara; Additional reporting by Kantaro Komiya; Editing by Muralikumar Anantharaman and Stephen Coates

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