Evergrande files for creditor protection in the USA
China's real estate group in financial distress

The highly indebted Chinese real estate giant China Evergrande has filed for creditor protection in the United States to protect itself from the claims of American creditors. The company's situation is extremely precarious, as it is considered the most indebted real estate company in the world. Under Chapter 15 of the U.S. Bankruptcy Code, foreign companies can be protected from lawsuits by American creditors while they restructure abroad. Evergrande is in deep crisis and has already announced a restructuring plan in January 2022.
The company's financial woes become clear when looking at its balance sheet data: In the last two years, Evergrande posted losses equivalent to 72 billion euros. The total debt of what was once China's largest construction company stands at 2.4 trillion yuan (about 300 billion euros) - a mountain of debt that is unparalleled anywhere in the world. The real estate bubble in China burst, leaving Evergrande in dire straits. Nevertheless, the company managed to avoid a chaotic collapse.
But the crisis in China's real estate sector, symbolized by Evergrande, extends beyond individual companies. The country's entire construction sector has been in a severe crisis for some time. Many construction companies had become increasingly indebted over the years. In 2020, the authorities took measures to stop the over-indebtedness. This led to insolvencies and unfinished construction projects. In addition, the real estate crisis is now affecting other sectors of the economy, including the financial sector. Zhongrong International Trust, a leading provider of trust funds in China, recently had to concede to its investors due to "short-term liquidity difficulties". So the effects of the real estate crisis are far-reaching and could last for a long time.
