China has urged banks to steady the housing market and avoid speculation as fears mount that Evergrande's debt crisis could spill over into the property sector.

Saddled with more than $300 billion in liabilities that it is struggling to repay, the Chinese property developer's potential collapse poses systemic risks for the national and global economy.

At a Wednesday meeting, the People's Bank of China (PBOC) said the country's financial sector must meet the goals of "stabilising land and housing prices" and "insist on not using real estate as a short-term economic stimulus," according to an online statement.

The central bank also stressed that "houses are used for living, not speculation".

The readout of the meeting with the banking and insurance regulatory commission did not specifically mention Shenzhen-based Evergrande.

But it sends a clear signal that authorities are worried about the repercussions of Evergrande's crisis on China's property sector, which has seen months of tightening regulations intended to curb speculation.

Beijing has so far been reluctant to bail out the conglomerate, but Chinese media reported that the Shenzhen government has begun an investigation into Evergrande's investment arm.

Shenzhen's financial regulator said in a Monday letter to investors that a "thorough investigation" was being carried out after collecting information about Evergrande Wealth, Chinese media reported this week.

- Chat groups blocked -

Chat groups containing hundreds of disgruntled Evergrande investors on the WeChat messaging service have been deleted or blocked since Monday, two investors told AFP, with members unable to send or receive messages.

These social media groups were used to organise protests in recent weeks, as investors demanded repayment after the properties and high yields on wealth products they were promised by Evergrande never materialised.

An error message in several chat groups shown to AFP read that the group was "suspected of violating relevant laws and regulations".

"Many group members were summoned by local police (in Shenzhen), some were even asked to sign agreements to... not petition Beijing," said one investor who wished to remain anonymous.

"We believe we are law-abiding citizens that have not violated the law. We just reasonably ask for our money back."

Evergrande has begun the process of disposing of its assets, including the sale of a $1.5 billion stake in a Chinese regional bank to a state-owned firm.

The developer said in a Thursday statement that it had completed a 10 percent repayment for investment products due in September, and that the funds had been "issued to the corresponding investors' accounts."

A $47.5 million interest payment on a US dollar bond was due Wednesday -- less than a week after the property giant was due to pay another offshore bond.

It reached a deal to pay interest on a yuan-denominated note last week.

Struggling Evergrande to sell $1.5 bn stake in Chinese bank
Beijing (AFP) Sept 29, 2021 - Embattled property developer Evergrande on Wednesday said it will sell a $1.5 billion stake in a regional Chinese bank to raise much-needed capital, as it struggles to make interest payments while being choked by debts and ratings downgrades.

The stake sale to a state-owned group is Evergrande's first major asset disposal as it attempts to claw its way back from the brink of collapse.

Experts fear a chaotic implosion of the company, which is saddled with more than $300 billion in debts, could reverberate through China's banking and property sectors, and possibly into the global economy.

The Shenzhen-based conglomerate agreed to sell 1.7 billion non-public shares in northeastern China's Shengjing Bank to Shenyang Shengjing Finance Investment Group, Evergrande said in a Hong Kong exchange filing.

"The Company's liquidity issue has adversely affected Shengjing Bank in a material way," the filing said, adding that the agreement would still need to be approved by the bank's board of directors.

Evergrande shares jumped more than 14 percent in Hong Kong on Wednesday.

A $47.5 million interest payment on a US dollar bond is also due on Wednesday, less than a week after it was meant to pay up for another note.

It is not known if the firm has met its obligations, though it has a 30-day grace period before it is considered to be in default. I did reach a deal to pay interest on a yuan-denominated note last week.

Fitch Ratings downgraded China Evergrande Group's credit score to C from CC, just above the equivalent default level, as the latest payment loomed.

"The downgrades reflect that Evergrande is likely to have missed interest payment on senior unsecured notes" and entered the grace period, Fitch analysts wrote in a report.

Some creditors claim that Evergrande is responsible for a further $260 million bond payment due Sunday and will press their claims if the firm defaults, Bloomberg News reported Tuesday.

Beijing has stayed silent on the travails of the property empire, but state media has trailed various responses in a nod to the mood towards a private company that grew on a debt binge in the boom years of Chinese real estate.

State newspaper Economic Daily said rules around China's property sector could be loosened purely because of Evergrande's woes.

"We cannot simply relax regulations just because of the emergence of some new situations in individual housing companies," it said in a commentary Wednesday. "We cannot return to the old path of using real estate as a short-term economic stimulus tool."

The group's high-flying EV unit scrapped a planned Shanghai listing over the weekend, warning of the parent company's "serious shortage of funds", which forced it to suspend payments to staff and suppliers.

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Evergrande fuels concerns over China's housing bubble
Beijing (AFP) Sept 28, 2021
A state crackdown on China's colossal property market has helped send one of its biggest developers to the brink of collapse, and analysts warn the fallout could lead to the bursting of a bubble that has been building for more than two decades. China's property market has been a critical part of the economy, as Beijing's promise to improve people's living standards translated into new homes that in turn fuelled massive construction. Hundreds of millions of middle-class Chinese see property as a ... read more