The Federal Reserve (Fed) warns that pressure in China’s real estate sector entangled in the Evergrande debt crisis, could affect the United States.
In its Financial Stability report released on Monday, the Fed warned of high leverage in financial institutions and stretching property valuations in China.
Since its involvement in the debt crisis, Evergrande has troubled global investors after it failed several times to repay debt to avoid default.
This has sparked concerns that it will have a bigger impact in the world’s second -largest economy, where a quarter of it is supported by the real estate sector.
The Fed says that pressure in China’s real estate sector could affect China’s financial system, and is likely to spread to America, according to the latest stability report released twice a year.
Given the size of China's economy and financial system as well as its extensive trade ties around the world, the pressures it faces could weigh on global financial markets through declining sentiment, posing risks to global economic growth and hurting the US.
Evergrande is now the most indebted company in the world with a debt stack reaching $ 300 billion. It had previously paid some coupons that were overdue within a 30 -day grace period after missing out on paying them on the due date.
