Property developer China Evergrande's debt woes are unlikely to cause the same fallout as the collapse of U.S. investment bank Lehman Brothers, analysts said.
He expects that if Evergrande can get some cash flow into its physical assets, the company can finish its development projects, sell them and start paying down debt.
"Evergrande is facing a liquidity crunch although it owns a large land bank," Larry Hu, chief China economist at Macquarie, said in a report Tuesday. He noted the developer's assets consist primarily of land and housing projects that are worth just over 1.4 trillion yuan .China Beige Bookled to a crash in financial derivatives — credit default swaps and collateralized debt obligations — "causing the market to doubt the health of other banks," Hu said.
"As the result, [the] local government has a strong incentive to stabilize land price. In the worst-case scenario, local government could even buy back land, as they did in 2014-15," he added.Another critical difference in Evergrande's case is the greater level of government control and involvement in China's real estate industry.
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