The Chinese Communist Party's principal policymaking committee has implemented new measures to kick-start the country's struggling economy. The imposition of the measures comes as the nation's debt-laden property sector continues to hamper its growth prospects.
On Monday, China's politburo approved a plan proposed by the central bank to help support businesses and the nation's housing market. The plan proposed by the People's Bank of China includes further cuts to the reserves required by most banks.
The additional 0.5 percentage points cut is expected to release another $188 billion into the economy. Officials also approved measures aimed at promoting the construction of affordable commercial housing while also meeting the needs of homebuyers. The committee, chaired by Xi, said the measures should help promote "healthy development" within the real estate industry.
The approval of the new measures comes as the country's second-largest property developer, China Evergrande, continues to struggle to meet its financial obligations. An $82.5 million bond payment was due to be paid by the developer on Monday to avoid default. Reports indicated that the company has yet to issue any payments.
China Evergrande had faced three such offshore bond deadlines since October and had met each one at the last minute, but it was less obvious that it would meet its obligation this time around.
In light of its financial troubles, the developer said on Monday evening that it plans to establish a risk management committee to "mitigate and eliminate future risks." Following a 20% loss in the previous session, the company's stock stabilized on Tuesday as a result of the statement. It came after the business indicated over the weekend that it might not be able to repay part of its $300 billion in obligations.
A default would result in cross-defaults on all of Evergrande's about $19 billion in dollar bonds in international capital markets, putting the business at risk of becoming China's biggest-ever defaulter, unsettling global investor confidence further.
Apart from China Evergrande, investors are also concerned about the liquidity of other developers such as Kaisa Group Holdings Ltd, which is in danger of also defaulting on its debts. The company currently has a $400 million bond maturing on Tuesday. It owes the most to foreign bondholders, behind Evergrande, with $12 billion in debt.
Sunshine 100 China Holdings, another Chinese developer, announced on Sunday that it had missed a deadline to repay $179 million in principle and interest on a 10.5% bond.
China's economy is not developing as swiftly as projected because of challenges such as a slowed global economy, ongoing Covid outbreaks, and a weakening property sector - once a crucial source of development but now beset by defaults.
