(Yicai Global) June 4 -- China Evergrande Group will slash debts by CNY284.3 billion (USD44.3 billion) before the end of the month, indicating that the Chinese property developer remains committed to meeting regulatory borrowing limits, The Paper reported yesterday, citing the company founder.

This represents a 31 percent drop in liabilities to CNY590 billion (USD92 billion) from the record high reached at the end of last year, Hui Ka Yan said. This will then be reduced to CNY450 billion by June 30 next year and to under CNY350 billion by June 30, 2023, he said.

His words will help quell fears of a funding crisis. Yesterday shares in Evergrande plunged over 6 percent after rumors started circulating that that the Shenzhen-based company is short of cash.

Property developers are under great pressure to reduce their level of debt. Last August, the People’s Bank of China and the Ministry of Housing and Urban-Rural Development set new financing rules for real estate firms to mitigate risk as the pace of borrowing reached record heights.

"Three red lines" were set up to control their scale of debt. These are a 70 percent upper limit of debt-to-asset ratio after excluding advance receipts, a 100 percent upper limit for net debt ratio and a one-to-one down limit ratio for cash against short-term debts.

Evergrande at present meets none of these requirements, but the latest reduction in debt should bring its net debt ratio to under 100 percent by the end of the month. It has set itself the goal of achieving the cash-to-short term debt ratio by the end of this year and to have a liability-to-asset ratio of under 70 percent by the end of next year.

China Evergrande [HKG:3333] gained 2.33 percent to close at HKD11.44 (USD1.47) today. Units Evergrande Property Services Group  [HKG:6666] closed down 1.39 percent at HKD9.20 and China Evergrande New Energy Vehicle Group [HKG:0708] nudged up 0.42 percent to finish at HKD35.8.

Editor: Kim Taylor