Exposure of Singapore-based Financial Companies to Chinese Property Developer Evergrande's Debt Crisis

Mr Saktiandi Supaat asked the Prime Minister in light of large Singapore investments in China and the crisis facing Chinese property developer Evergrande (a) whether there are any financial institutions or companies with financial exposure to the Chinese property sector; (b) if so, what is the size of the financial exposure incurred by these financial institutions and companies; (c) what is the anticipated impact in the event of a fallout; and (d) how will our financial institutions be affected by any contagion effect.

I will answer the Parliamentary Questions (PQs) related to concerns on China Evergrande Group together, including the:

(a) oral PQ from Mr Saktiandi Supaat filed for today’s Sitting; and

(b) written PQ from Mr Desmond Choo filed for the next Sitting.

There are three aspects to the recent developments in China’s property sector that are relevant to Singapore. First, the exposure of Singapore’s financial system to China Evergrande Group and China’s property sector. Second, the exposure of Singapore’s property developers to China. And third, the exposure of Singapore’s economy to a possible growth slowdown in China.

First, Singapore’s banking system exposure to China’s property sector is not large.

Direct exposures to China’s property sector are less than 1% of non-bank loans.

Exposures to Singapore property developers with operations in China are a further 2.5% of loans to non-bank customers. However, this includes all loans to these developers, not just loans related to their Chinese operations.

Our banking sector’s loan exposures to China Evergrande Group itself are insignificant.

Second, with regard to Singapore developers with operations in China, MAS estimates that about 30% of their revenues in aggregate are derived from China. However, their median interest cover ratio (or ratio of earnings to interest expenses) is in aggregate more than three times.

Third, while the Chinese authorities have thus far maintained stability in their financial system, the slowdown in China’s real estate sector could dampen its GDP growth. It is difficult to estimate how significant this will be, and hence how adverse its impact will be on regional economic growth. MAS and MTI are keeping a close watch on any indirect or spillover effects on the Singapore economy arising from developments in China.