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The global economy has been put on the brink of disaster after the Chinese property giant Evergrande Group filed for bankruptcy in New York on Thursday.
The company posted an $80bn loss across the past 24 months and has more than £230bn ($300bn) in total liabilities, according to reports.
The collapse of the company could have enormous ripple effects on the world economy, and threaten the UK’s economic stability.
The company’s move to file for bankruptcy will allow it to protect assets it holds in the US, while it works on a major multibillion-dollar deal with creditors.
According to Walter Bloomberg, a global market specialist posting on X, China has asked “private funds to consolidate confidence in stocks”.
The Spectator Index added on the platform formerly known as Twitter: “China’s property giant Evergrande Group, which yesterday filed for US bankruptcy in a New York court, posted an $80 billion loss over the past two years and has over $300 billion in total liabilities.”
Problems at the property firm emerged in 2021 when it defaulted on its huge debts.
The emergence of such a default caused mayhem in the global financial markets.
It comes at a time of huge crisis in Chinese real estate, adding to concerns about the state of the world’s second-largest economy.
The Chapter 15 bankruptcy protection filing was made in New York on Thursday, the BBC reported, which protects the US assets of a foreign company as it restructures debts.
Evergrande currently has more than 1,300 different projects it is working on across 280 cities in China and also boasts an electric car maker and football clubs among its portfolio.
The football club, Guangzhou FC, is the only one from China to have won the AFC Champions League twice, in 2013 and 2015, when it was managed by the likes of World Cup-winning coaches Marcello Lippi and Luiz Felipe Scolari.
As the debts racked up across the past years, Evergrande became the world’s most heavily indebted property developer.
Last month it was revealed it had lost $80bn (£62.7bn) in just two years.
It comes as another Chinese property giant, Country Garden, said it could lose up to $7.6bn (£6bn) for the first six months of the year.
Steven Cochrane of economics research firm Moody’s Analytics said: “The key to this issue is to complete unfinished projects because this will at least keep some of the financing flowing.”
He added that some of the properties are pre-sold, meaning that if construction on the homes stops, buyers no longer make mortgage payments.
This in turn adds to the strain on Evergrande.
