CNBC reports that according to a former advisor to China’s central bank, Evergrande’s debt crisis will slow down China’s economic growth, but will likely have minimal spillover on the country’s financial system.

“The impact is on the real economy because with the default of Evergrande, there’ll be [a] slowdown in developments of many projects,” Li Daokui, formerly an advisor to the People’s Bank of China, said.

“So the real property market will have an impact on the GDP growth rate for the coming year because of slower finance for the whole sector,” said Li, now a professor at Tsinghua University’s School of Economics and Management.  

He added that a default by Evergrande will have minimal effect on the Chinese financial system because there aren’t derivative instruments built on the company’s debt.

“I think it’s a bit too early to predict what’s the net impact [of the crisis]. I would say right now, by my rough calculation, 1 basis point on GDP growth ... if the thing is under control from now,” said Li.  

The Asian Development Bank said Wednesday that it has maintained its growth forecasts for China at 8.1% for 2021 and 5.5% for 2022. That would be an improvement from the 2.3% expansion last year, when China became the only major economy to grow while most global economies were hit hard by the Covid-19 pandemic.