The Evergrande Group – the Chinese property giant whose rapid expansion and subsequent enormous debts and default – led to shockwaves though global financial markets, has filed for protection from creditors in a US bankruptcy court.
Now bearing the dubious title of the world’s most indebted property developer, Evergrande defaulted on debts in 2021, and subsequently announced in March of this year that it was seeking to embark on a debt restructuring program. The company has more than €300 billion in liabilities, it was reported.
Filing for protection allows the property giant to protect its assets as it works through what will likely be a multi-billion dollar deal with creditors seeking repayments.
The move to file for protection will bring further attention to concerns over China’s deepening property crisis and a spluttering economy.
Evergrande says that it racked up huge losses amounting to $80bn over the last two years – and last week, another Chinese property giant, Country Garden, also signaled that their losses for the first six months of the year could reach $7.6bn
Unfinished building projects and cash flow problems, along with a sluggish sales and falling house prices have bedeviled the Chinese market.
“China’s massive real estate sector has long been a vital engine of growth for the world’s second-largest economy, and accounts for as much as 30% of the country’s gross domestic product,” CNBC reported. But investors are now concerned that developers are over-borrowed in the teeth of a declining market.
BBC reports that; “Earlier this month, Beijing said that China’s economy had slipped into deflation as consumer prices declined in July for the first time in more than two years.”
“Weak growth means China is not facing the rising prices that have rattled many other countries and prompted central bankers elsewhere to sharply increase borrowing costs.”
“The country’s imports and exports also fell sharply last month as weaker global demand threatened the recovery prospects of the world’s second-largest economy.”