File photo: An overview of the Central Financial District of Hong Kong, China, March 11, 2021. Reuters / Tyrone Shiu / FILE PHOTO
September 28, 2021
HONG KONG (Reuters) – The risk to Hong Kong banks by heavily indebted Chinese real estate developers is manageable, a top executive at the city’s banking regulator said on Tuesday.
The debt crisis involving China’s Evergreen Group has started hurting the sentiments of Chinese home buyers, forcing developers to cut prices. Evergrande has a debt of $305 billion, raising concerns that the problem could spread across China’s financial system and resonate around the world. So far, concerns have been eased as the losses are concentrated in the real estate sector.
The Hong Kong Monetary Authority’s deputy chief executive, Arthur Yuen, told a meeting that these issues are unlikely to have a significant impact on banks in Asian financial centres.
“There has been a lot of attention from both the industry and the media from highly leveraged borrowers, especially some developers in mainland China, one of which is that both the industry and us have been relatively on the last few years. We are on the industry sector. There is a lot of attention, which is under a lot of stress. Therefore, the exposure to the banking system for these highly leveraged borrowers is not very high.”
“At this point, the risk is fairly manageable, but we still urge the industry to be cautious,” Yuen said.
(Reporting by Alun John, edited by Raju Gopalakrishnan)