Property giant Evergrande has taken the step of filing for bankruptcy protection in the US as the real estate crisis in China continues to worsen. This move will allow the heavily-indebted company to safeguard its assets in the US as it works towards negotiating a multi-billion dollar deal with its creditors. Evergrande’s defaulting on its massive debts in 2021 created significant turmoil in global financial markets. The decision to file for bankruptcy protection comes against the backdrop of mounting concerns over the country’s property market, further exacerbating worries about the second largest economy in the world.

China Evergrande Group has initiated the Chapter 15 bankruptcy protection filing in a New York court on Thursday. Chapter 15 offers protection to the US assets of a foreign company while it engages in the process of restructuring its substantial debts. Evergrande has not yet responded to the BBC’s request for comment regarding this matter.

Since defaulting on its debt repayments in 2021, Evergrande has been making efforts to renegotiate its agreements with creditors. The company’s debt is estimated to surpass $300 billion (┬ú235 billion), rendering it the most heavily indebted property developer globally. Trading of Evergrande shares has been suspended since March 2022.

Last month, Evergrande disclosed a combined loss of 581.9 billion yuan ($80 billion; £62.7 billion) in the past two years. Adding to the distress, another major Chinese property giant, Country Garden, recently warned of a potential loss of up to $7.6 billion for the first half of this year.

The dire financial situation faced by prominent companies in China’s real estate sector is impeding their ability to secure funding for completing ongoing projects. Steven Cochrane of Moody’s Analytics, an economics research firm, emphasized that completing unfinished projects is crucial to ensure a steady flow of financing. Failure to do so prompts buyers to halt mortgage payments which further strains developers’ financial position.