Europe has limited direct exposure to Evergrande debt crisis


LONDON — European Central Bank President Christine Lagarde believes Europe’s direct exposure to the embattled Chinese property firm Evergrande could be “limited.”

It comes at a time when international inventory markets are on excessive alert over Evergrande’s massive debt problems.

Investors worry Evergrande, which has seen its share worth plummet in latest months amid a widespread crackdown by Beijing on extremely leveraged builders, will default on a number of bond payments this week.

The firm is deeply intertwined with China’s broader economic system, and plenty of monetary establishments are uncovered to the cash-strapped developer by way of direct loans and oblique holdings.

Market consultants say a deepening liquidity crisis at Evergrande could send further ripples across the global economy, however they consider the difficulty will possible be contained by the Chinese authorities and isn’t anticipated to set off imminent contagion.

Speaking to CNBC’s Annette Weisbach in Frankfurt, Germany on Thursday, Lagarde mentioned the ECB was protecting tabs on the debt-laden property developer.

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

“I have very vivid memories of [the] latest stock market developments in China that had a bearing across the world. But in Europe and in the euro area, in particular, direct exposure would be limited,” Lagarde mentioned.

When requested whether or not the ECB was ready for the prospect of a chaotic international knock-on impact within the occasion of Evergrande’s collapse, Lagarde replied: “As I told you, for the moment, what we are seeing is [a] China-centric impact and exposure. I can’t speak for the United States [but] I can say for Europe that its direct exposure is limited.”

Lagarde’s feedback come shortly after U.S. Federal Reserve Chair Jerome Powell mentioned Evergrande’s debt issues appeared specific to China.

Powell informed reporters on Wednesday that he didn’t see a parallel with the U.S. company sector.

“In terms of the implications for us, there’s not a lot of direct United States exposure. The big Chinese banks are not tremendously exposed, but you would worry it would affect global financial conditions through global confidence channels and that kind of thing,” Powell mentioned on Wednesday.

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

Shares of Evergrande in Hong Kong fell round 7% on Friday. The Wall Street Journal reported Thursday that Chinese authorities have informed native officers to put together for a possible demise of Evergrande.

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