China tries to ease fears amid woes of developer

BEIJING — China’s central bank expanded the supply of money for lending Monday as Beijing tried to reassure its public and investors the economy can be protected if a troubled real estate developer’s $310 billion mountain of debt collapses.

Evergrande Group’s struggle to turn assets into cash has prompted fear a default might chill Chinese lending markets and cause global shockwaves.

Economists say the ruling Communist Party can prevent a credit crunch, but it wants to avoid sending the wrong signal by bailing out Evergrande in the middle of a campaign to force companies to cut debt Beijing worries is dangerously high.

The People’s Bank of China said it released $190 billion for lending by reducing the amount of money banks must hold in reserve.

Beijing was expected to show support for lending after Evergrande warned Friday night that it might run out of cash, but the central bank made no mention of the company, which it earlier accused of reckless borrowing.

Developers have been racing to pay off debt since Beijing lowered limits on their use of borrowed money last year.

Weaker real estate activity depressed economic growth to an unexpectedly low 4.9% over a year earlier in the last quarter.

The People’s Bank said it wants to “support development of the real economy.”

It said the reserve cut was no change in “prudent monetary policy.”

If Evergrande defaults, Beijing is likely to launch a two-track strategy of pumping money into credit markets while trying to prevent home prices from crashing if developers dump apartments in a “fire sale” to raise cash, said ING economist Iris Pang.