Shares in Chinese construction company Evergrande fell to lows since 2010 on the Hong Kong stock exchange today following the group's announcement that it may not be able to pay its debts.

The Chinese real estate giant, Evergrande with a debt of $310 billion, admitted on Friday that it may be "unable to meet its financial obligations."

In a statement released Friday on the Hong Kong stock exchange, Evergrande said that after reviewing its finances with outside advisors, "there is no assurance that the group has sufficient funds to continue to meet its financial obligations."

Soon after, regulators sought to calm investors by assuring that the Chinese financial system is strong and default rates are low.

They added that many real estate developers are financially healthy and that Beijing will continue to let credit markets function.

"The risk of contagion from group risk events in the stable operation of the capital market is manageable," the Chinese capital market regulatory commission asserted on its web portal.

The Central Bank and the Regulator have made similar statements.

Beijing's leaders have in the past year increased restrictions on the debt levels of real estate developers, seeking to control rising corporate debt, seen as a threat to economic stability.

The Communist Party has made financial risk reduction a priority since 2018.

In 2014, the authorities authorized the first bond default since the 1949 revolution.

The Chinese authorities have been allowing defaults gradually, hoping to force lenders and investors to be more disciplined.

Nevertheless, total debt of corporations, government and households increased from about 270% of Gross Domestic Product in 2018 to about 300% last year, figures rarely seen in middle-income country economies.

Evergrande, the largest debtor in the construction industry, has a debt of two trillion ($310 billion), mostly owed to domestic banks and bond investors. It also owes $19 billion to foreign bondholders.

The company has been selling assets to pay off debt and announced plans to give some bondholders apartments in projects it is building.

Evergrande chairman Xu Jiayin was called in Friday for a meeting with leaders of his province, Guangdong, the government said in a statement. In the note, it advanced that a government team would be sent to Evergrande's headquarters to help manage the risk.

Evergrande's press release advanced that the company faces demands to honor a $260 million payment. If it is unable to comply, it predicted, then other creditors may demand early repayment.

Source Lusa