HONG KONG (Reuters) – China Evergrande Group has agreed to settle interest payments on a domestic bond, while the central bank injected cash into the banking system, soothing fears of imminent contagion from the debt-laden property developer.

CARLOS CASANOVA, senior economist for Asia at Union Bancaire Privee, Hong Kong

“In my opinion it shows they are closer to reaching an agreement with the government as to how they should go about this managed restructuring.

Two reasons wealth management products exist. It’s not clear what the potential risks are in this area. This has led to quite a bit social unrest. Over the last few months, we’ve witnessed protesters gather outside Evergrande headquarters to protest unpaid wealth management product.

It’s not the government’s intention to convey that wealth management product returns are certain, but it’s important for social stability to ensure that Chinese homebuyers receive their houses and their investment back.

According to me, it indicates that they are getting closer in being in a place where they can reach an agreement on how to manage this situation.

EZIEN HOO, credit analyst at OCBC Bank in Singapore

“We think there are two parts to this: One, the nature of investors and, two, how far the investors sit from the assets.

If this scenario is to be restructured, we believe that the WMP retail investor aspect would be prioritized for stability.

We are particularly concerned because we know that WMP shareholders include employees. We believe this is despite the WMPs’ legal status. The exact terms of such products remain unclear (for instance, whether Evergande’s developmental projects guarantee such products). There were no disclosures regarding WMPs found in the company’s consolidated audited finances.

The dollar bond bonds (presumably these are the ones foreign bondholders most are interested in) are issued from offshore entities. These bonds would not be subject to local lenders. Far from assets means lower bargaining power than other lenders, particularly lenders with direct claims to assets.

Aside from that, it is likely many dollar-bond holders are institutional funds or exchange traded funds managed by highly skilled investors. Evergrande has had its liquidity problems well documented for at least several months.

WEI-LIANG CHANG, macro strategist at DBS Bank in Singapore

“Wealth management products are marketed to retail investors, and there is likely political pressure on the company to ensure a fair settlement. Professional investors who have invested in bonds should expect to do their research and receive no special treatment.

“The priority for creditors in restructuring should not be affected, but will depend upon the legal clauses of the bonds or wealth products.

BERND HARTMANN, Head CIO Office at boutique private bank VP Bank

“China’s political leadership is likely to be aware of the seriousness of the situation. It could lead to the dissolution of Evergrande Group. Evergrande already sells its goodies. This is a continuation of the government’s already determined path to dismantling monopoly structures within the real estate industry.

We assume the Chinese leadership will step in, and we will pay close attention to what form that takes. In order to stop a spillover from other sectors, authorities will attempt to dismantle Evergrande and release liquidity. Beijing will also try to safeguard private property buyers, who may have paid their mortgages but still awaiting completion. It is likely that the government will ensure completion of all real estate projects.

A sale to private firms has been a failure. There is the possibility that intervention will take place through Guangdong province government, instead of the central government. Creditors would suffer the most.

The biggest impact on property sales and prices would be the long-term and severe decline in their value. This should be prevented. China may short-term diverge from the course it is taking to cool the real estate market by tighter lending.

LONG CHEN, partner at Plenum, an independent research platform, in Beijing

“China has experienced several high-profile bank failures and corporate bankruptcies over the past three years. Evergrande’s financial risk is not much greater than the ones in HNA or Baoshang Bank. Evergrande’s dollar bond is trading at below 30c so it is not a surprise at all to see a default…

“The top task is to get the apartments built, and the government has multiple options to get that done. Avoiding a collapse of the nation’s property is also important. This requires changing policies that are currently too aggressive.

While nobody is willing to bail out Evergrande, they don’t want a crisis. Beijing will find it easier to relax its policies the sooner Evergrande is gone. It will feel more like a “whatever it takes” moment than a “Lehman moment”. Markets will feel greater pains in the days ahead, but less after.

($1 = 0.1547 renminbi)