China asks local officials to prepare for ‘possible storm’ if Evergrande fails, WSJ says

Chinese authorities have told local officials to prepare for a potential demise of heavily indebted property developer Evergrande, the Wall Street Journal reported on Thursday.

Local officials described the signals from Chinese authorities as “getting ready for the possible storm” and said the government told them they should only step in at the last minute to prevent spillover effects from Evergrande’s demise, the WSJ report said.

The report indicates that the central government may still have a limited appetite for bailing out the company, despite the global implications. Fears about Evergrande not being able to make interest payments have grown in recent weeks and were seen as one of the causes for market sell-offs around the world on Monday.

The company resolved payment on a local bond on Wednesday, helping to boost Asian markets. However, it is unclear if the company will pay interest due Thursday on its offshore bonds.

Bloomberg reported on Thursday that authorities in Beijing told the company not to default on those dollar-denominated interest payments.

Evergrande is a conglomerate company that grew to massive scale amid a debt-fueled building boom in China. The high level of corporate debt has created concern in Beijing, leading to China place restrictions on lending that, along with a decline in housing demand, appear to have hurt Evergrande.

Read more about this story at the Wall Street Journal.