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SHANGHAI: The spillover effect of China Evergrande Group's debt problems on the banking system is controllable, a central bank official said on Friday, in rare official comments on a liquidity crisis at China's No. 2 developer that has roiled global markets.

Chinese authorities are urging Evergrande to step up asset disposals and the resumption of projects, Zou Lan, head of financial markets at the People's Bank of China (PBOC), told a briefing, adding that individual financial institutions did not have highly concentrated exposure to Evergrande.

"In recent years, this company did not operate and manage itself well. It failed to conduct prudent operations according to changing market conditions, and it blindly diversified and expanded its business," Zou told the briefing in Beijing.

Chinese officials and state media have been largely silent on the crisis at Evergrande, which has missed a series of bond interest payments and has $300 billion in debt, making it the world's most indebted developer.

Zou also said property firms that have issued bonds overseas should actively fulfil their debt repayment obligations.

Evergrande has left its offshore investors in the dark about repayment plans after already missing three rounds of interest payments on its dollar bonds.

Zou's comments came as sources told Reuters that Evergrande CEO Xia Haijun was holding talks in Hong Kong with investment banks and creditors over a possible restructuring and asset sales.

Xia had been in Hong Kong for more than two months, several sources told Reuters. Xia needed to communicate with foreign banks on loan extensions and repayments, one of the sources said.

Another Chinese developer, Xinyuan Real Estate Co's, avoided a default on a maturing dollar bond on Friday, saying in a Singapore Exchange filing that bondholders had agreed to an offer to accept new bonds and cash in exchange for maturing notes.

Xinyuan said that holders of more than 90% of the company's $229 million notes due Oct. 15 had agreed to the exchange, which would see it deliver new bonds worth $205.4 million and $19.1 million cash.

Xinyuan's 14.5% September 2023 bond crashed nearly 30% on Friday to trade at 58.35 cents, according to data provider Duration Finance.

The agreement follows warnings from other developers that they could default on their bonds, while still others have taken steps to delay payments in the wake of Evergrande's troubles.

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