Europe has limited direct exposure to the Evergrande debt crisis



LONDON – European Central Bank President Christine Lagarde believes Europe’s direct exposure to Chinese real estate company Evergrande would be “limited”.

This comes at a time when global stock markets are on high alert to Evergrande’s massive debt problems.

Investors fear that Evergrande, which has seen its share price plummet in recent months amid Beijing’s widespread crackdown on highly leveraged developers, could default on a number of payments in the past. ‘bonds this week.

The company is deeply tied to the wider Chinese economy, and many financial institutions are exposed to the cash-strapped developer through direct loans and indirect holdings.

Market experts say a worsening liquidity crisis in Evergrande could cause further spillover effects in the global economy, but they believe the problem will likely be contained by the Chinese government and should not trigger impending contagion.

Speaking to CNBC’s Annette Weisbach in Frankfurt, Germany on Thursday, Lagarde said the ECB was keeping an eye on the debt-laden property developer.

“We are looking at it,” she said. “We are monitoring and I had a briefing earlier today because I think all financial markets are interconnected.”

“I have vivid memories of [the] latest stock market developments in China which have impacted across the world. But in Europe and the eurozone, in particular, direct exposure would be limited, ”Lagarde said.

When asked if the ECB was prepared for the prospect of a chaotic global ripple effect in the event of an Evergrande collapse, Lagarde replied: “As I told you, for now, this that we see is [a] Impact and exposure focused on China. I cannot speak for the United States [but] I can say for Europe that its direct exposure is limited. “

Lagarde’s comments come shortly after U.S. Federal Reserve Chairman Jerome Powell said Evergrande’s debt problems appeared peculiar to China.

Powell told reporters on Wednesday he saw no parallel with the U.S. corporate sector.

“In terms of implications for us, there is not a lot of direct exposure in the US. The big Chinese banks are not very exposed, but you would be concerned that this would affect global financial conditions through global trust channels and that sort of thing, “Powell said. said Wednesday.

“I wouldn’t draw a parallel with the corporate sector in the United States,” he added.

Evergrande shares in Hong Kong fell around 7% on Friday. The Wall Street Journal reported Thursday that Chinese authorities have asked local authorities to prepare for a possible disappearance of Evergrande.


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