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Web Desk — In shocking news, China’s Evergrande Group filed for bankruptcy in New York on Thursday. It is worth mentioning that Evergrande was once the country’s second-largest property developer.
CNN has reported that Evergrande Group borrowed heavily and defaulted on its debt in 2021, sparking a massive property crisis in China’s economy, which continues to feel the aftershocks.
Chapter 15 Bankruptcy
It is notable that Evergrande filed for Chapter 15 bankruptcy protection, which allows a US bankruptcy court to step in when an insolvency case involves another country.
Chapter 15 bankruptcy is meant to help promote liaison between US courts, debtors, and courts of other countries involved in cross-border bankruptcy proceedings.
China is considered the world’s second-largest economy and the real estate sector was long seen as its vital growth engine, accounting for as much as 30% of the country’s GDP. But Evergrande’s 2021 default was an economic bomb that exploded on China’s property markets, damaging homeowners and the broader financial system in the country.
It is said that the company’s default came after Beijing began cracking down on excessive borrowings by developers in an attempt to rein in soaring housing prices.
Several other major developers in China, including Kasia, Fantasia, and Shimao Group have defaulted too on their debts, since Evergrande’s collapse. Country Garden, another Chinese real estate giant, recently warned that it would “consider adopting various debt management measures” — fueling speculation that the company may be preparing to restructure its debt as it struggles to raise cash.
According to its website, Evergrande is a huge company with more than 1,300 real estate projects in more than 280 cities. The company also deals in many non-real estate businesses, such as electric vehicles, healthcare, and a theme park.
Evergrande’s debt reached 2.437 trillion yuan ($340 billion) by the end of last year. That is roughly 2% of China’s entire gross domestic product, CNN further reported.
Last month, Evergrande reported in a stock market filing that it had lost $81 billion of shareholder’s money in 2021 and 2022.
