MercoPress. South Atlantic News Agency

Relief in world markets, China's mega Evergrande will pay some of its debts

Evergrande employs 200,000 people in more than 280 cities and says it is responsible for another 3,8 million indirect jobs.

China's largest real estate group, Evergrande and on the brink of bankruptcy announced on Wednesday an agreement with a creditor to avoid the nonpayment of a bond that matured this Thursday. In a release to the Shenzhen stock exchange, its affiliate announced it had reached a plan to pay the bond's interests, (not capital) and of which markets feared the worst.

Bloomberg estimated interest payments totalled some US$ 35,9 million but the Evergrande release does not mention a second interest payment of another bond maturing this week.

The agreement should give the giant real estate group some breathing space. The group employs 200,000 people in more than 280 cities and says it is responsible for another 3,8 million indirect jobs.

Founded in 1990, Evergrande went through a boom period and took debt equivalent to some US$ 300 billion. But last week the mega-group admitted it was under “great pressure” since it did not have the necessary liquidity, triggering panic and protests among its clients, suppliers and investors fearing the risk of losing their money.

The possibility that the group could go down or default, and its impact on the Chinese economy shocked world markets earlier this week.

However, OECD also mentioned that China has “the fiscal and monetary capacity to absorb such a shock” in the event of a collapse, and implied regulators could force banks to restructure Evergrande debts until a final solution could be worked out.