China Evergrande unlikely to cause financial crisis, BOK says

Given the low exposure of local banks to the debt-laden developer and the ability of Chinese regulators to control markets, the Bank of Korea said.
Image: Gilles Sabrie/Bloomberg

China Evergrande Group’s troubles are unlikely to trigger a financial crisis given the low exposure of local banks to the debt-laden developer and the ability of Chinese regulators to control markets, the Bank of Korea said Sunday.

China’s government may provide liquidity to the company and help it proceed with ongoing construction projects, South Korea’s central bank said in a weekly report. A recovery in the global economy will be positive for China and offset a potential shock from the debt crisis, the bank said.

Evergrande’s problems will slow China’s growth, but the impact will be limited, the bank said. The Korean central bank added that it needs to monitor other structural issues in China, such as so-called shadow banking activities and corporate debt that may in turn hurt the global economy.

© 2021 Bloomberg

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