The China Evergrande group has been declared in default on its dollar debt by Fitch Ratings. Evergrande is the second largest residential real estate company in China, with more than 1,300 projects in 280 cities.
The US-based rating agency downgraded the developer’s rating to Restricted Default due to the non-payment of US $ 1.2 billion in bond repayments during the grace period, which expired on Monday .
The Chinese company has the biggest debt of any private enterprise in the world – $ 300 billion in June.
The Evergrande saga has been closely watched in global markets as the sheer volume of the company’s debt could destabilize the Chinese real estate market and affect other countries.
Earlier this month, Chinese authorities summoned Evergrande’s founder after the company said it may not be able to repay its debt. The company is committed to “Actively engage” with offshore creditors on a restructuring plan.
Evergrande has already missed a deadline in early November to repay debts totaling $ 82.5 million.
Last month, one of Evergrande’s largest shareholders, Hong Kong-based Chinese Estates Holdings, reduced its stake in the company by selling around 270 million shares.
The People’s Bank of China said in October that Evergrande’s problems are a “individual phenomenon“And the risks due to its potential defect are”controllable, the real estate sector of the remaining country “healthy. “
Two years of the Covid-19 pandemic and other obstacles to growth have slowed the Chinese economy and created an unprecedented recession in the country’s real estate market.
Critics say the housing Evergrande built is unaffordable for most people in the country and the company is unable to sell what it builds.
China’s economy relies heavily on real estate, with some estimates suggesting that annual real estate activity accounts for around 29% of China’s GDP, 10-20% more than in most developed countries.
For more articles on economics and finance, visit the business section of RT