Authors: Marc Jones and Ross Kerber

London/Boston (Reuters)-After only three months after narrowly avoiding bankruptcy, China Evergrande Group, the world's most indebted developer, is again faltering. Investors still don't know how much or how long these issues will have an impact.

Evergrande has more than 300 billion U.S. dollars in debt and more than 1,300 real estate projects, becoming a typical representative of China's real estate crisis this year, which has destroyed nearly a dozen smaller developers.

Evergrande may still pay the $82.5 million overdue bond, which has now reached the grace period, but it warned that it might not.

Logan Wright, head of Chinese market research at Rhodium Consulting, said that at a time when China's real estate sales are slowing, Evergrande’s disorderly default may aggravate the financial pressure on the entire real estate industry.

A resolution must account for billions of renminbi for contractors and suppliers.

Wright said: "At present, the potential source of this financing is almost unclear, even if people are more confident that the authorities will respond with some kind of resolution to limit financial contagion."

At the end of the grace period in the past few months, the 11th hour payment method narrowly avoided becoming China's biggest default, and Evergrande returned to the leading position again.

However, investors said that unlike a few months ago, China’s internal influence has been widely contained. As Beijing’s policymakers’ voices become louder and the market becomes more familiar, the consequences of Evergrande’s troubles will not be met. So common.

Ren Liqian, director of the Wisdom Tree who pays attention to China, predicts that Evergrande may default.

However, she pointed out that Friday’s central bank statement and other similar official statements promised that Evergrande is a separate issue and that long-term financing functions will not be affected.

She said: "When you have something that no one knows who owns something, infection will happen", and things move quickly. Instead, she added that Evergrande’s default looks more like the case of HNA Group, whose restructuring plan was approved by creditors in October.

Tracy Chen, fixed-income portfolio manager at Brandywine Global Investment Management, also believes that the broader risk of Evergrande’s failure is low.

"I think the possibility of systemic risk is very small, and regulators have been doing what they call a'limited explosion'," Chen said.

The Central Bank of China has injected 1.2 trillion yuan (US$188 billion) into the banking system. This is the second such move https://www.reuters.com/business/chinas-rrreminder-that-economies-remain-fragile- 2021-07-09 Since July, the local government where Evergrande is located has indicated that it is intervening.

In China, the question for industry experts is whether this can prevent more infections.

Since the evasion in October, some of Evergrande's smaller competitors have either closed down or reorganized. Kaisa was China's first real estate default in 2015. Next year, there will be more than US$3 billion in debt that needs to be refinanced, and it is also in serious conflict.

"In general, there hasn't been much change (since the Hengda deadline in October), but market sentiment has changed," said Seaport Global analyst Himanshu Porwal, who pointed to a series of smaller defaults.

He said that the provincial government hopes to intervene in cases like Evergrande is positive, but no state-owned real estate company participates in the company's project to ease its liquidity crunch. (Illustration: Fitch China Real Estate and Land Sales, https://fingfx.thomsonreuters.com/gfx/mkt/akvezomgdpr/Fitch%20China%20proper%20and%20land%20sales.PNG)

At the same time, domestic destruction continues.

China's real estate high-yield bonds have suffered their worst year ever, with an average decline of more than one-third, while defaulters such as Evergrande, Kaisa and Fantasia have fallen by at least 80%.

JPMorgan Chase has already had 11 defaults this year, with land sales falling more than 55% year-on-year, and housing sales fell 25% in October, and more defaults are expected.

It believes that Beijing needs more direct support.

Frank Pan, the company’s head of corporate research in Asia, said: “In order to prevent contagion from spreading to the credit curve, regulators need to consider stabilizing physical demand and financial markets.”

"The worrying thing is that if regulators fail to prevent large-scale defaults in the industry, we may see more bonds at distressed levels," adding that even "better quality" companies may find that Refinancing becomes more difficult. (Illustration: Evergrande will become the second largest emerging market company in default Evergrande will become the second largest emerging market company in default, https://graphics.reuters.com/EMERGING-DEFAULTS/movanjdlrpa/chart.png)

(Other reports and graphics provided by Karin Strohecker, Svea Herbst-Bayliss, and Rodrigo Campos; edited by Stephen Coates)