New Delhi: Troubles in China’s vast real estate sector could spill over to the global economy, including the United States, according to the US Federal Reserve, the CNN reported.
The US central bank has warned that China’s ongoing property woes could elevate “financial stresses in China, [which] could further strain global financial markets and negatively affect the United States”.
In its biannual report on financial stability, the Fed pointed specifically to the crisis at Evergrande, China’s most indebted developer. The company has sparked fears of contagion since September upon warning that it could default on its debts of more than $300 billion. Several other real estate developers are also in trouble, the report added.
Though “Chinese authorities have introduced measures to cool down property markets”, there is a risk that “financial vulnerabilities will continue to rise”, the Fed noted, CNN reported.
The central bank warned that given the size of China’s economy and financial system, and its global ties, “financial stresses in China could strain global financial markets through a deterioration of risk sentiment, pose risks to global economic growth, and affect the United States”, it added.
Evergrande is one of China’s largest real estate developers. The company is part of the Global 500, meaning that it’s also one of the world’s biggest businesses by revenue.
Stocks in Hong Kong, New York and other major markets have previously been swayed by fears of contagion from Evergrande and a slowdown in Chinese growth.