Saudi Press

Saudi Arabia and the world
Monday, Feb 02, 2026

Evergrande can't pay its debts. China is scrambling to contain the fallout

Evergrande can't pay its debts. China is scrambling to contain the fallout

Evergrande has defaulted on its debt. Now Beijing is intervening to prevent a disorderly collapse of the indebted real estate group that could wreak havoc on the world's second biggest economy.

Fitch Ratings on Thursday declared that the embattled property developer has entered "restricted default," reflecting the company's inability to pay overdue interest earlier this week on two dollar bonds. The payments were due a month ago, and grace periods lapsed Monday.

Evergrande's apparent failure to pay that interest has revived fears about the future of the company, which is reeling under more than $300 billion of total liabilities. Evergrande is massive — it has about 200,000 employees, raked in more than $110 billion in sales last year, and owns more than 1,300 developments in more than 280 cities, according to the company.

Analysts have long been concerned that a collapse could trigger wider risks for China's property market, hurting homeowners and the broader financial system. Real estate and related industries account for as much as 30% of GDP.

Chinese authorities have so far downplayed the prospect of spillover risks.

"China's leadership is attempting to play it cool, but the circumstances surrounding Evergrande's downward spiral raises serious questions about [Chinese President] Xi Jinping's stewardship over China's rapidly cooling economy," said Craig Singleton, an adjunct fellow in the China Program at the Foundation for Defense of Democracies, a research institute based in Washington, D.C.

There's already plenty of evidence that Beijing is taking a leading role in guiding Evergrande through a restructuring of its debt and sprawling business operations.

The local government in Guangdong province, where Evergrande is based, said late last week that it would send officials into the firm to oversee risk management, strengthen internal controls and maintain normal operations.

And earlier this week, Evergrande announced it would set up a risk management committee, including government representatives, to focus on "mitigating and eliminating" future risks. Among its members are top officials from major state-owned enterprises in Guangdong, as well as an executive from a major bad debt manager owned by the central government.

Chinese authorities have taken other steps as well. The central bank on Monday announced that it would pump $188 billion into the economy, apparently to counter the real estate slump.

"These latest interventions, by both the central government and officials in Guangdong, suggest Chinese officials now begrudgingly accept that Evergrande is, in fact, 'too big to fail,'" Singleton said.

Global investors may 'take a hair cut'


The massive restructuring is going to come with some pain, at least for global bond holders.

Beijing has made it clear that its priority is protecting the thousands of Chinese people who have bought unfinished apartments, along with construction workers, suppliers and small investors. It also wants to limit the risk of other real estate firms going under. Investor fears over Evergrande's default have pushed up financing costs for other developers, as yields on offshore Chinese corporate debt surge.

At the same time, the government has been trying for more than a year to rein in excessive borrowing by developers — and so won't want to dilute that message.

That means the government may be "happy to see the firm itself go under and investors take a haircut," said Louis Kuijs, head of Asia economics at Oxford Economics, in a research note on Friday.

Chinese regulators have blamed Evergrande's crisis on the company's leaders. Its problems were the result of "poor management and blind expansion," the central bank and the country's securities regulator said Monday in public statements, reiterating previous criticisms.

Yi's comments on Thursday, made during a video speech to a forum in Hong Kong, underscore the government's priorities. He noted that Evergrande's problems would be handled in "a market-oriented way."

That "reinforces the ongoing stance from authorities of not turning to any bailout," said Yeap Jun Rong, market strategist for IG Group.

Spillover to growth


It's a "delicate balancing act" to allow Evergrande to fail while minimizing any economic or financial impact, Kujis said, especially given the broader downturn in real estate that has already seen several other developers default, including Kaisa Group this week.

New home prices in China fell in October for the second consecutive month, according to figures from the National Bureau of Statistics. The fall in September was the first in six years on a month-on-month basis.

A major slowdown in the property sector, along with other factors, could drag China's GDP growth next year down to 4.3%, according to Ting Lu, Nomura's chief China economist. That's much lower than the firm's estimated growth for 2021 of 7.8%.

During an online conference Friday, Lu also warned that the government shouldn't suddenly reverse its curbs on real estate finance. Such a turnaround would hurt Beijing's long-term goals, he added, pointing to its desire to reduce the economy's reliance on property and divert resources away from property into other sectors, such as tech.

Kuijs from Oxford Economics expects Beijing to take targeted policy measures for homeowners, troubled developers, or banks that are exposed to debt risks. He suggested such moves could include making it easier for developers to raise funds on the capital market, adjusting land policies, and increasing the construction of rental units.

"We also expect broader easing of fiscal and monetary policy," he said. "And it is likely the government will take steps to contain ripple effects in the financial system, including possibly ring-fencing banks particularly exposed to developers in trouble."

Singleton warned, though, that the real estate crisis remains a looming threat for China.

"The possibility of contagion in other parts of China's vast economy remains very real," he said. "And, it is on this issue where China's central bank faces its biggest constraint — while it may be able to contain the financial implications from a housing default, it cannot offset the housing market's impact on China's real economy."

Newsletter

Related Articles

Saudi Press
0:00
0:00
Close
Germany and Saudi Arabia Move to Deepen Energy Cooperation Amid Global Transition
Saudi Aviation Records Historic Passenger Traffic in 2025 and Sets Sights on Further Growth in 2026
Tech Market Shifts and AI Investment Surge Drive Global Innovation and Layoffs
Global Shifts in War, Trade, Energy and Security Mark Major International Developments
Tesla Ends Model S and X Production and Sends $2 Billion to xAI as 2025 Revenue Declines
The AI Hiring Doom Loop — Algorithmic Recruiting Filters Out Top Talent and Rewards Average or Fake Candidates
Federal Reserve Holds Interest Rate at 3.75% as Powell Faces DOJ Criminal Investigation During 2026 Decision
Putin’s Four-Year Ukraine Invasion Cost: Russia’s Mass Casualty Attrition and the Donbas Security-Guarantee Tradeoff
Saudi Crown Prince Tells Iranian President: Kingdom Will Not Host Attacks Against Iran
U.S. Central Command Announces Regional Air Exercise as Iran Unveils Drone Carrier Footage
Trump Defends Saudi Crown Prince in Heated Exchange After Reporter Questions Khashoggi Murder and 9/11 Links
Saudi Stocks Rally as Kingdom Prepares to Fully Open Capital Market to Global Investors
Air France and KLM Suspend Multiple Middle East Routes as Regional Tensions Disrupt Aviation
Saudi Arabia scales back Neom as The Line is redesigned and Trojena downsized
Saudi Industrial Group Completes One Point Three Billion Dollar Acquisition of South Africa’s Barloworld
Saudi-Backed LIV Golf Confirms Return to Trump National Bedminster for 2026 Season
Gold Jumps More Than 8% in a Week as the Dollar Slides Amid Greenland Tariff Dispute
Boston Dynamics Atlas humanoid robot and LG CLOiD home robot: the platform lock-in fight to control Physical AI
United States under President Donald Trump completes withdrawal from the World Health Organization: health sovereignty versus global outbreak early-warning access
Trump Administration’s Iran Military Buildup and Sanctions Campaign Puts Deterrence Credibility on the Line
Tech Brief: AI Compute, Chips, and Platform Power Moves Driving Today’s Market Narrative
NATO’s Stress Test Under Trump: Alliance Credibility, Burden-Sharing, and the Fight Over Strategic Territory
Saudi Arabia’s Careful Balancing Act in Relations with Israel Amid Regional and Domestic Pressures
Greenland, Gaza, and Global Leverage: Today’s 10 Power Stories Shaping Markets and Security
America’s Venezuela Oil Grip Meets China’s Demand: Market Power, Legal Shockwaves, and the New Rules of Energy Leverage
Trump’s Board of Peace: Breakthrough Diplomacy or a Hostile Takeover of Global Order?
Prince William to Make Official Visit to Saudi Arabia in February
Saudi Arabia Advances Ambitious Artificial River Mega-Project to Transform Water Security
Saudi Crown Prince and Syrian President Discuss Stabilisation, Reconstruction and Regional Ties in Riyadh Talks
Mohammed bin Salman Confronts the ‘Iranian Moment’ as Saudi Leadership Faces Regional Test
Cybercrime, Inc.: When Crime Becomes an Economy. How the World Accidentally Built a Twenty-Trillion-Dollar Criminal Economy
Strategic Restraint, Credible Force, and the Discipline of Power
Donald Trump Organization Unveils Championship Golf Course and Luxury Resort Project in Saudi Arabia
Inside Diriyah: Saudi Arabia’s $63.2 Billion Vision to Transform Its Historic Heart into a Global Tourism Powerhouse
Trump Designates Saudi Arabia a Major Non-NATO Ally, Elevating US–Riyadh Defense Partnership
Trump Organization Deepens Saudi Property Focus with $10 Billion Luxury Developments
There is no sovereign immunity for poisoning millions with drugs.
Mohammed bin Salman’s Global Standing: Strategic Partner in Transition Amid Debate Over His Role
Saudi Arabia Opens Property Market to Foreign Buyers in Landmark Reform
The U.S. State Department’s account in Persian: “President Trump is a man of action. If you didn’t know it until now, now you do—do not play games with President Trump.”
CNN’s Ranking of Israel’s Women’s Rights Sparks Debate After Misleading Global Index Comparison
Saudi Arabia’s Shifting Regional Alignment Raises Strategic Concerns in Jerusalem
OPEC+ Holds Oil Output Steady Amid Member Tensions and Market Oversupply
Iranian Protests Intensify as Another Revolutionary Guard Member Is Killed and Khamenei Blames the West
President Trump Says United States Will Administer Venezuela Until a Secure Leadership Transition
Delta Force Identified as Unit Behind U.S. Operation That Captured Venezuela’s President
Trump Announces U.S. Large-Scale Strike on Venezuela, Declares President Maduro and Wife Captured
Saudi-UAE Rift Adds Complexity to Middle East Diplomacy as Trump Signals Firm Leadership
OPEC+ to Keep Oil Output Policy Unchanged Despite Saudi-UAE Tensions Over Yemen
Saudi Arabia and UAE at Odds in Yemen Conflict as Southern Offensive Deepens Gulf Rift
×