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Until a few days ago it was one of the most valuable real estate companies in the world, but the collapse of the giant Evergrande has placed it on the verge of bankruptcy and has revived fears of a Chinese real estate bubble.
Many are wondering if the case will become the "Lehman Brothers" of the world's second largest economy.
China faces a tough decision similar to the one the US government had to make in 2008 when it let the investment bank Lehman Brothers fail.
That case, 13 years ago, kicked off what is known as the Great Financial Crisis .
Now the Chinese government must decide whether to keep one of the country's major construction companies afloat or let it disappear, putting more than 1,300 real estate developments in 280 cities across the country at risk.
The company's main problem is its large debt, which, among all its financial commitments, amounts to US$300 billion.
It is the most indebted real estate company in the world.
During the last few years, he dedicated himself to taking out loans to finance not only his construction division but also many other businesses into which he has expanded: amusement parks, water bottling plants, electric vehicles, and he even bought a football team .
Its bankruptcy would also jeopardize all these divisions , the 200,000 direct employees and the more than 3.8 million indirect jobs it creates annually.
"The collapse of Evergrande would be the biggest test China's financial system has faced in years," estimates Mark Williams, chief Asia economist at Capital Economics.
A vicious circle
Evergrande depends to continue operating on the money it receives from pre-sales of apartments under construction , which are usually shown off-plan.
But due to various factors, sales have slowed down and with less income, the company cannot pay its suppliers , who stop supplying materials or services.
This means he can't finish the houses and therefore can't raise more cash: it's a vicious cycle.
A statement issued by the company said its executives said its cash flow was under "enormous pressure".
Some of Evergrande's projects have already been put on hold as the company puts assets up for sale to generate liquidity and tries to negotiate with its suppliers to delay payments and avoid bankruptcy.
"China has introduced very strict measures to force real estate developers to reduce debt on their balance sheets," explains Fabrice Jacob, CEO of JK Capital, part of the La Française group, referring to the measures implemented by China to try to control the real estate bubble and combat speculation.
Important pillar of the economy
The real estate sector, one of the pillars of Chinese economic growth in recent decades, represents 7.5% of the country's gross domestic product,
"This has prompted Evergrande to cut its sales prices on all its projects by 30%, the biggest discount it has ever offered," he adds.
However, all attempts to calm tempers among its creditors or those who bought a home that it can now not finish have been in vain.
In recent days, small demonstrations have taken place in various cities .
More than a million people are waiting to move into their new homes.
They have paid deposits and could potentially lose that money if bankruptcy occurs.
Fears of contagion
Kunjal Gala, manager of Federated Hermes' international business, says it is impossible to know for sure what would happen if Beijing allowed Evergrande to collapse; the uncertainty in the market has been evident.
" Pressure on Beijing to intervene in the Evergrande case is growing as the downward spiral of China's largest property developer continues and signs of financial contagion increase," the analyst estimates.
"Rather than allowing a chaotic collapse into bankruptcy, many analysts predict that regulators will engineer a restructuring to keep systemic risk to a minimum. But nothing is certain," he says.
For now, Hong Kong's benchmark Hang Seng index registered on Monday in a day marked by the collapse of real estate companies affected by the Evergrande case.
And on Tuesday it opened in the red again: with a drop of 1.08%.
Why would it matter if Evergrande collapsed?
In addition to the job losses and the possibility that thousands of people will lose their money due to the houses that will not be built, there are also the companies that do business with Evergrande.
These construction and design companies, or material suppliers, run the risk of suffering significant losses, which could in turn lead to their bankruptcy .
But the domino effect could continue beyond China's borders.
Some analysts have suggested that the company's debt problems could pose widespread risks to the financial system of the world's second-largest economy.
There are concerns that other property developers who are also heavily indebted may follow the same path.
Credit crisis?
As the great credit crisis of 2008 showed, when property developers go bankrupt, the banks and investors who lent them money register losses and end up restricting credit to small businesses and individuals .
"The financial consequences would be far-reaching. Evergrande reportedly owes money to some 171 national banks and 121 other financial firms," Mattie Bekink of the Economist Intelligence Unit (EIU) told the BBC.
If Evergrande goes bankrupt, banks and other lenders may be forced to lend less.
This could lead to what is known as a credit crisis, when companies struggle to obtain loans at affordable rates.
A credit crisis would be very bad news for the world's second largest economy, because companies that cannot obtain loans have difficulty growing and, in some cases, cannot continue operating.
This could also make foreign investors nervous, who might see China as a less attractive place to invest.
In fact, some firms have already been reducing their exposure to China for some time
To make that decision, explains Richard Bernstein, CEO of Richard Bernstein Advisors, his firm relied "on the deterioration of fundamentals and the better prospects in other parts of the world ."
"Our exposure is now only around 1%. China accounts for approximately 4% of global stock markets," he explained.
