As the housing market crisis in China continues to deteriorate, Evergrande has initiated the bankruptcy process in the United States.
While the deeply indebted organization is in the process of negotiating a multibillion-dollar settlement with its creditors, this will give the company the ability to protect its assets in the United States.
Evergrande was unable to pay its large debts in 2021, which caused shockwaves to be sent across the financial markets around the world.
The problems that have been plaguing China's real estate sector have given rise to a heightened level of anxiety regarding the world's second-largest economy.
On Thursday, China Evergrande Group submitted an application for protection under Chapter 15 with a court in the state of New York. Chapter 15 protects a foreign company's U.S. assets while it restructures its debts.
According to its website, the group's real estate division has more than 1,300 developments in more than 280 cities. It also operates an electric vehicle manufacturer and a football club.
Evergrande has been trying to renegotiate its contracts with its creditors in the wake of the company's decision to default on its debt repayments.
It is claimed that the company's commitments total more than $300 billion (or 235 billion pounds), making it the most indebted real estate developer in the world. Since December of last year, there has been a halt placed on the trading of its shares.
Evergrande reported to the public one month ago that it had incurred a cumulative loss of 581.9 billion yuan ($80 billion; £62.7 billion) during the course of the prior two years.
Country Garden, an additional big Chinese real estate company, issued a warning the previous week stating that it may potentially lose as much as $7.6 billion in the first half of the year.
Some of the largest developers on China's real estate market are unable to secure sufficient funding to complete projects.
Steven Cochrane of the economics research firm Moody's Analytics stated, "Completing unresolved projects is the key to resolving this problem, as this will at least keep some financing flowing."
He added that many homes are pre-sold, but if construction is halted, buyers cease making mortgage payments, thereby increasing the financial strain on developers.
Beijing announced earlier this month that China's economy had entered deflation, as consumer prices fell in July for the first time in more than two years.
China is not experiencing the rising prices that have shaken many other nations and prompted central bankers in other nations to drastically increase borrowing costs.
Imports and exports also fell sharply last month, threatening the economic recovery prospects of the second-largest economy in the globe.
July exports decreased by 14.5% compared to the same month the previous year, while imports decreased by 12.2%. In an effort to stimulate the economy, China's central bank unexpectedly reduced key interest rates for the second time in three months earlier this week.
