China Evergrande got a slap on the wrist from the People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) in a rare joint public statement from the regulators released on Thursday after a meeting with Evergrande executives. The regulators asked the developer to fix its debt issues and to not spread false information. This underscores Beijing’s tough stance towards the world’s most indebted developer that has over $300bn in liabilities and adds to investor concerns over Evergrande’s financial position. The company responded by stating, “it will work to fully meet regulators’ requirements, and will do its best to maintain stable operations, resolve debt risks, and keep stability in housing and financial markets,” as per Bloomberg. All eyes are now on Evergrande’s upcoming board meeting on August 31 to approve the company’s earnings for the first half.
Yan Yuejin, research director at Shanghai-based E-house China Research and Development Institute said, “It shows top regulators want to avoid letting Evergrande’s risks translate into financial system risks…There could be further regulations to curb debt risks related to developers.” Dollar bonds of the company sold off with its 8.25% 2022s down 4.3 points to 46.37 and its 8.75% 2025s down 1.5 points to 37.375 cents on the dollar.
In related news, Evergrande is said to be in talks with Xiaomi and Shenzhen state-backed investment firms to sell a piece of its 65% stake in its electric vehicle (EV) unit, as per three Reuters sources. The company’s EV unit is valued at $12.5bn as per its market cap on Thursday. The rumors come as smartphone maker Xiaomi has vowed to ramp up its investments in the EV space after announcing an investment of $10bn in the EV space in March. A deal would help Evergrande secure much-needed cash to repay its mounting liabilities. However, there was no official statement on this from either of the companies.