HONG KONG/SHANGHAI (Reuters) - China Evergrande Group appeared to have averted default with a last-minute bond coupon payment, a source said on Friday, buying it another week to wrestle with a debt crisis looming over the world's second-biggest economy.

The property developer sent $83.5 million to a Citibank trustee account on Thursday, the person with knowledge of the matter told Reuters, enabling it to pay interest on a U.S. dollar bond due by Saturday.

That brought relief for investors and regulators worried about fallout for global markets and added to reassurances from Chinese officials that creditors would be protected.

Still, the world's most indebted property firm - with more than $300 billion in liabilities - needs to make payments on a string of other bonds, with the next major deadline to avoid default on Oct. 29.

With little known about its ability to pay and property sales tumbling 30% in the last 12 months, there is deep scepticism over Evergrande's capacity to ride out the crisis.

The company, once China's top-selling property developer, did not respond to a request for comment.

Citibank declined to comment.

Evergrande's woes have snowballed for months and its dwindling resources set against its vast liabilities have wiped out 80% of its value.

Founded in Guangzhou in 1996, the developer epitomised a freewheeling era of borrowing and building. But that business model has been scuttled by hundreds of new rules designed to curb developers' debt frenzy and promote affordable housing.

Evergrande Chairman Hui Ka Yan was quoted on Friday by the state-backed Securities Times as saying the developer would reduce its property sales to about 200 billion yuan ($31 billion) a year to overhaul its business.

'BIT OF A RELIEF'

It was not clear how cash-strapped Evergrande was able to raise funds to pay the bondholders or whether any had already received the money. Evergrande next needs to find $47.5 million by Oct. 29 next and has nearly $338 million in other offshore coupon payments coming up in November and December.

"While obviously a positive, the coupon payment does not address the overall concerns about Evergrande's sustained liquidity through the first maturity in Q2 2022 and beyond," said John Han, a partner at law firm Kobre & Kim in Hong Kong.

"This only shows that the company is not yet ready for the house to come down completely through a massive cascade of cross defaults. Time is needed for what is planned next."

If it fails to make next week's payment, or any other final deadlines in coming weeks, defaults would be triggered on all $19 billion of its bonds in international capital markets.

That would be the second biggest emerging market corporate default after Venezuela's state-owned oil firm.

News of the fund transfer came a day after financial information provider REDD said Evergrande had secured more time to pay a defaulted bond it guaranteed, issued by Jumbo Fortune Enterprises.

"They seem to be avoiding short-term default and it's a bit of a relief that they have managed to find liquidity," said a Hong Kong-based debt restructuring lawyer representing some bondholders.

"This payment might be a way for them to get some sort of buy-in with stakeholders before the heavy work needed on the restructuring."

Evergrande missed coupon payments totalling nearly $280 million on its dollar bonds on Sept. 23, Sept. 29 and Oct. 11, beginning 30-day grace periods for each.

MARKET MOVES

Evergrande's dollar bond prices surged on Friday morning after news of the transfer, with its April 2022 and 2023 notes jumping more than 10%, data from Duration Finance showed, though they still traded at deeply distressed levels of less than a quarter of face value.

Those gains evaporated on Friday afternoon in Asia, however, pushing several of the company's other bonds down more than 6%.

Evergrande's shares rose as much as 7.8% before closing up 4.3%, but still finished a shortened week down 8.8%.

Evergrande's woes have reverberated across the $5 trillion Chinese property sector, which accounts for a quarter of the economy by some metrics, with a string of default announcements, rating downgrades and slumping corporate bonds.

Chinese property companies could now be locked out of offshore debt markets until early next year.

Still, Friday's news helped the Hang Seng mainland properties index rise 3.3%.

In mainland markets, the CSI300 Real Estate index finished up 2.4%, and an index tracking the broader property sector added 2%.

SAFETY FIRST

Asked whether it would step in to help its rival ease its liquidity crisis, the chairman of China's third-biggest developer, China Vanke Co Ltd, said developers needed to ensure their own safety first.

"Everyone feels the chill as 'winter' arrives for the sector," Chairman Yu Liang told a company forum on Friday.

Any prospect of Evergrande's demise raises questions over more than 1,300 real estate projects it has in some 280 cities.

Bank exposure to developers is also extensive.

A leaked 2020 document, branded a fake by Evergrande but taken seriously by analysts, showed the company's liabilities extended to more than 128 banks and over 121 non-banking institutions.

"Given that we have little clarity on how bank financing is going for stalled real estate projects, but we know that project pre-sales are down a lot, the onshore business is unlikely to be supplying cash to Evergrande near-term," said Quiddity's Lundy.

(Reporting by Clare Jim and Scott Murdoch in Hong Kong, Samuel Shen and Andrew Galbraith in Shanghai, Anshuman Daga and Tom Westbrook in Singapore, and Marc Jones in London; Writing by Sam Holmes and Andrew Cawthorne; Editing by Christopher Cushing and David Clarke)