Chinese authorities warn local governments to brace for Evergrande collapse

Chinese authorities have told local governments to brace for the ripple effects if heavily indebted property developer Evergrande collapses.

According to the Wall Street Journal, local governments in China have been tasked with stemming the damage inflicted on homeowners and preventing civil unrest if Evergrande folds.

The property developer was scheduled to make an interest payment to bondholders today, but has provided no update on whether it will meet its obligations. Another payment is due next week.

Evergrande is estimated to have $305bn of debt on its balance sheet, caused by the company financing its rapid expansion across China through heavily leveraging itself.

It claims to have built 12m homes. It has extended into other business lines beyond real estate, including setting up an electric car business and acquiring Guangzhou football club.

Reports have also emerged showing Evergrande has stopped paying staff and suppliers in its electric vehicle unit.

Global markets have been rattled this week by rumours the property is nearing a collapse. Evergrande did fulfill one of its debt payments this week, which cooled market jitters over the possible poisonous effects if it did liquidate.