China’s Evergrande Group missed three bond interest payments in September and October 2021, but has been able to make payment on its obligations just before the end of their respective one-month grace periods. Three other smaller real estate developers have since disclosed cash flow issues. Evergrande’s growing debt problems have sent a frisson of fear through international financial markets, and investors remain jittery about the possibility of future defaults. While spillovers from Evergrande developments appear relatively contained for now, market price action, the financial health of China’s real estate sector as a whole, and interlinkages within the global bank and insurance universe underscore the critical importance of preventing the manifestation of contagion risks.

Authors: Chaipat Poonpatpibul, Li Lian Ong, Prashant Pande, Yin Fai Ho, Zhiwen Jiao