Yi Gang said that the default risks of some companies and the operational difficulties of small and medium-sized banks are some of the challenges for the Chinese economy, and that the authorities are closely monitoring “so that they do not become systemic risks.”
Although growth has moderated due to a sporadic increase in coronavirus infections, the Chinese economy is expected to grow 8% this year, Yi said at an online meeting of the Group of 30 International Banking Seminar, which coincides with the annual meetings of the International Monetary Fund and the World Bank.
They prevent Evergrande problems from spreading
Authorities will first try to prevent Evergrande’s problems from spilling over to other real estate companies to avoid broader systemic risk, he added.
The crisis at Evergrande and other large homebuilders sent the debt market risk premiums of weaker Chinese companies to a record high last week and triggered a new round of credit rating downgrades.
“The interest of creditors and shareholders will be fully respected in accordance with the law,” Yi said. “The law has clearly indicated the priority of liabilities.”
The authorities will give the highest priority to the protection of consumers and home buyers, while respecting the rights of creditors and shareholders, he said.
The BPC was taking various measures to defend itself against financial risks, such as capital replenishment for small and medium-sized banks, Yi Gang said.