Chinese Developer Defaults Leading to Panic Over Economic Fallout

Chinese Developer Defaults Leading to Panic Over Economic Fallout

(AbsoluteNews.com) – Fitch Ratings is a credit rating agency in the United States that researches and analyzes global financial markets. On December 9, the company announced that real estate giant China Evergrande Group defaulted on its outstanding $1.2-billion bond debt obligations, forcing Fitch to downgrade its status to a restricted default rating. US Treasury Secretary Janet Yellen warned the company’s failure could have “global consequences” In addition, the Federal Reserve said the strain on the Chinese market could “pose risks to global economic growth,” which would impact the United States.

Reportedly, over 10 real estate firms in China defaulted on debts during the second half of 2021, which Bloomberg Television stated is a “significant event.”

Officials created a risk-management committee to deal with the situation and refused a government bailout. A partner with research firm Plenum, Chen Long, said the next step is “the creditors will sue Evergrande” for payment, and the company will have to restructure. Due to the size of the real estate company, finance professionals saw instability in China’s credit markets for fear of Evergrande’s collapse.

The company’s founder, Xu Jiayin, is allegedly selling some of his assets to help cover the debt. Given the size of the obligation, it’s unlikely his efforts will be enough.

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