China’s Evergrande facing day of reckoning

Teetering Chinese property giant China Evergrande formally abandoned plans to sell a $2.6 billion stake in one of its key units on Wednesday, as Beijing officials went out in force to say the problems would not spin out of control.

Once China’s top-selling developer and now reeling under more than $300 billion of debt, Evergrande was in talks to sell a 50.1 percent stake in its Evergrande Property Services arm to smaller rival Hopson Development Holdings.

In a stock exchange filing late on Wednesday, Evergrande said that the company had reason to believe that Hopson had not met the “prerequisite to make a general offer” for its unit without elaborating further.

In a separate exchange filing, Evergrande said barring its sale of a stake worth $1.5 billion in Chinese lender Shengjing Bank Co, it had made no material progress in selling other assets it has put on the block.

Evergrande’s disclosures came after a number of top Chinese officials had sought to reassure homebuyers and markets that the current woes in the property sector would not be allowed to turn into a full-scale crisis.

Worries that a cash crunch at Evergrande, whose liabilities are equal to 2 percent of China’s gross domestic product, could cause economic contagion have seen swathes of other heavily-indebted developers hit with credit rating downgrades, while some smaller ones have already defaulted.