The Chinese property developer Evergrande is reeling and making investors nervous.

 

The Chinese property developer Evergrande is reeling and making investors nervous.

https://www.nytimes.com/live/2021/09/20/business/economy-stock-market-news

 

The troubled property giant Evergrande, once China’s most prolific developer, has become the country’s most indebted company, a position that means its default could ripple across the country’s economy.

 

The company, which was founded in 1996, rode China’s property boom that urbanized large swathes of the country and resulted in nearly three-quarters of household wealth being tied up in housing. This put Evergrande at the center of power in an economy that came to lean on the property market for supercharged economic growth.

 

But Chinese regulators are cracking down on the reckless borrowing habits of property developers. Adding to the company’s misery, China’s property market is slowing and there is less demand for new apartments.

 

Today, Evergrande is seen as a rickety threat to China’s biggest banks:

 

It owes money to lenders, suppliers and foreign investors.

 

It owes unfinished apartments to home buyers and has racked up more than $300 billion in unpaid bills.

 

It faces lawsuits from creditors and has seen its shares lose more than 80 percent of their value this year.

 

A failure on the scale of Evergrande would hit the economy, and spell financial ruin for ordinary households. The ratings agency Fitch said this month that default “appears probable.” Moody’s, another ratings agency, said Evergrande was out of cash and time.

 

Panic from investors could also shake global financial markets and make it harder for other Chinese companies to continue to finance their businesses with foreign investment.

 

On Monday, the company’s woes began to bleed into the broader market. Investors sold off the Hong Kong-listed shares of some of China’s biggest property developers as worries grew that Evergrande’s spiraling debt woes could affect the financing abilities of other developers at a time of heightened regulatory scrutiny.

 

But economists did not expect the situation to upend the Federal Reserve’s meeting this week. “It’s a risk, certainly,” said Gennadiy Goldberg, a rates strategist at T.D. Securities. But he noted that it was unlikely that the Fed would commit clearly this week anyway, instead signaling that it was likely to slow bond purchases by the end of the year without giving a clear date.

 

Jeanna Smialek contributed reporting.

 

— Alexandra Stevenson and Cao Li