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Real estate developer China Evergrande has filed for bankruptcy protection in the United States as it seeks a long-term restructuring deal with international creditors holding billions of dollars in bonds.

Evergrande defaulted on its dollar-denominated debt in late 2021, triggering an industry-wide liquidity crisis, dragging down China’s economic growth and mounting pressure on policymakers in Beijing. The company has about $19 billion in foreign liabilities, according to Bloomberg data.

Country Garden, China’s largest private homebuilder, also missed its international debt repayment this month, and until recently was seen as a safer developer than many of its highly leveraged peers, as did investment group Zhongrong, which failed to repay savings products.

The events have reignited fears of a slowdown in the real estate sector, which typically drives more than a quarter of China’s economic activity. The turmoil threatens to spread to other sectors of the economy as Beijing grapples with deflation, weak exports and soaring youth unemployment.

Evergrande is the most indebted developer in the world, with debts of US$340 billion, and last month announced losses of US$81 billion in 2021 and 2022.

The company’s bankruptcy filing in New York court, signed by the company’s foreign representative, Jimmy Fong, relies on the so-called Chapter 15 process in the United States where foreign companies seek recognition of their reorganization.

The group is expected to hold a meeting with creditors this month in Hong Kong over a restructuring plan proposed in March.

Evergrande held about $20 billion in international bonds at the time of default and proposed offering investors notes related to the group’s Hong Kong-listed subsidiary.

Dozens of Chinese developers have defaulted on their debt since Evergrande collapsed. Beijing launched a deleveraging campaign in 2020 to try to stave off overheating housing prices, but so far has refrained from any major bailouts or stimulus measures, instead seeking to complete unfinished projects.

In China, homebuyers often buy apartments before they are completed. Data this week showed new home prices fell in July.

Zhongrong is part of the so-called trust industry that has funneled trillions of renminbi into investments across the economy, and its failure to make payments has raised concerns about shadow finance’s exposure to the struggling real estate sector .

Zhongrong sued Evergrande in May 2022, accusing it of investing 1.9 billion yuan ($260 million), according to Evergrande’s annual corporate bond filings.

Additional reporting by William Langley and Andy Lin in Hong Kong

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