Report: Chinese developer in trouble pays bond issue

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BEIJING – A troubled Chinese developer whose struggle to avoid a multi-billion dollar debt default has rocked global financial markets on Friday remitted $ 83.5 million to make an overdue payment to overseas bondholders, reported a government newspaper.

Evergrande Group’s struggle to cut its 2 trillion yuan ($ 310 billion) in debt to meet stricter official borrowing limits has raised fears that a default could spark a financial crisis. Chinese officials have tried to allay investor fears by saying the debt problems can be controlled and there should be no impact on the financial industry.

Evergrande transferred funds to a Citigroup account on Friday for a bond payment due Sept. 23, the Securities Times reported, citing unidentified sources.

Evergrande failed to make payments to investors in US dollar bonds overseas in late September and early October. The company said Wednesday that a 30-day grace period on these payments had not expired before it defaulted.

The ruling Communist Party is pushing for companies to reduce debt, which it believes is dangerously high.

Economists say Beijing can prevent a credit crunch if Evergrande defaults on debt with Chinese banks and bondholders, but wants to avoid seemingly arranging a bailout while it tries to force other companies to reduce their reliance on the debt .

The slowdown in construction helped push China’s economic growth down to an unexpectedly low 4.9% year-on-year for the three months ended September. Forecasts suggest that growth will continue to slow if funding constraints remain in place.

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