The once second largest property developer in China, the Evergrande Group, has sought help from the United States in filing for Chapter 15 Bankruptcy. In its decent, the beleaguered firm borrowed heavily and defaulted on its debt in 2021. This sparked a property crisis in the China economy, which continues to feel its impact. Chapter 15 bankruptcy is intended to help promote cooperation between US courts, debtors, and other countries’ courts involved in cross-border bankruptcy proceedings.

In China, the world’s second largest economy, the real estate sector has seen a major growth cycle and has accounted for as much as 30% of the country’s GDP. Suffice to say, Evergrande’s 2021 default sent shockwaves through China’s property markets, damaging homeowners, and the broader financial system in the country.

The company’s default came after Beijing began cracking down on excessive borrowing by developers to rein in soaring housing prices. Crisis hit when they used billions of dollars raised by selling wealth management products to retail investors for funding as well as to pay back other wealth management investors.

Evergrande is a massive company with more than 1,300 real estate projects in more than 280 cities, according to its website. The company also has several non-real estate businesses, including an electric vehicle business, a health care business, and a theme park business. They have since divested a 28% stake in its EV (Electric Vehicle) manufacturer to offset their losses.

Evergrande has struggled to pay off its loans after officially defaulting on its debt in late-2021. The property company’s debt load reached 2.437 Tn yuan ($340 billion) by the end of last year. That is roughly 2% of China’s entire gross domestic product.

Evergrande also reported in a stock market filing last month that it had lost $81 billion of shareholder money in 2021 and 2022. The Evergrande Group is seeking a U.S. court’s approval to restructure upwards of $19 Bn in the company’s offshore debts, as the beset property developer attempts to forge one of the world’s largest and most complex debt restructurings.

Like the United States, the property craze in China since their loosening of private sale restrictions in 1998 has been powered by debt as builders rush to satisfy expected future demand. Annual sales of dollar-denominated offshore bonds experienced a rise to $64.7 Bn in 2020 from $675 Mn in 2009. Risk management flaws have led to excessive speculation and astronomical prices in cities such as Shenzhen where real estate is becoming even less affordable to local incomes than in London or New York.