Chinese real estate giant Evergrande files for bankruptcy protection in the US

Residential buildings built by the Evergrande Group in Beijing, China Photo: Bloomberg

China's Evergrande, the world's most indebted property developer , has filed for bankruptcy protection in the US as the Beijing real estate crisis deepens.

The move will protect Evergrande, which has more than $300 billion in debt, from US creditors while it works on a restructuring deal in other countries.

Last month, Evergrande posted a £62bn loss after defaulting on its 2021 debt, setting off a property shock in China.

The filing comes amid fears that troubles in China's highly leveraged real estate sector are spilling over into the country's economy as a whole as domestic stocks tumble and the yuan weakens against the dollar.

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China's other real estate giant, Country Garden, failed to make a payment on its bonds earlier this month. The developer's debt exceeds $200 billion, raising fears of a new large-scale default.

Country Garden shares tumbled earlier this week amid fears the company could default on its debt as early as September. One of the world's top 500 companies, Country Garden has previously been considered more stable than rival Evergrande.

Yang Huiyang, chief executive of Country Garden, who was once one of the richest women in Asia,» said that the company «has faced its greatest challenges since our founding.»

Evergrande's bankruptcy will add to concerns about China's construction sector, a key part of the country's economic growth engine, which has fallen since the Covid pandemic.

The US filing is part of an effort by Evergrande, once China's best-selling property developer, to restructure $32 billion in foreign debt.

Shares in China are at their lowest level in nine months. as fears of a post-Covid economic recovery intensify. The Hang Seng index fell 1.2% in Friday trading.

This week, analysts lowered their growth forecasts for the Chinese economy. Morgan Stanley suggested that it will grow by 4.7 percent in 2023, lower than the previous forecast of 5 percent.