China's real estate giant Evergrande's debt crisis had the world worried. What if there are other companies like Evergrande? International rating agencies did downgrade some real estate companies soon after Evergrande. These were small in size having no large-scale impact.

But fears of yet another large company tumbling down came true recently when Kaisa, one of the country's largest real estate companies, announced that it was at risk of default on payments. The company's shares were suspended from trading in Hong Kong.

Even the Federal Reserve is concerned about the Chinese real estate sector crisis, saying that it "posed some risk to the US financial system." In its latest Financial Stability Report, it has further warned that the stress could cause "a sudden correction of real estate prices" and impact China's financial system. (https://www.barrons.com/news/us-fed-flags-potential-risk-from-china-s-evergrande-01636408807)
The Chinese government has taken some steps to regulate the over-heated real estate sector. It recently expanded property tax on residential and commercial property in various cities. The idea was that there would be less speculation, and the activity in the sector would go down. (https://www.theguardian.com/world/2021/nov/05/speculation-nation-can-xi-jinpings-property-tax-deflate-chinas-housing-bubble)

But that has not yielded dividends. At least so far. Experts cite a few reasons.

Since real estate has been one of the pillars of economic growth, contributing about 29% to China's GDP, it has been reluctant to take stern steps to stop the speculation in the market. (https://www.theguardian.com/world/2021/oct/15/chinas-booming-real-estate-market-could-spell-trouble-for-the-economy)

Some estimates suggest real estate companies owe $5 trillion in debt and if more companies default, the Chinese government may not be able to stop the sector from going under. The residential real estate has been largely fuelled by Chinese buying second homes in the last decade hoping that the property rates would continue rising. But that bubble has been pricked and some estimates put empty homes in China at 65 million units which is a large number. (https://www.dw.com/en/why-chinas-property-crash-isnt-a-new-lehman-moment/a-59716702) If people start defaulting on their loans, companies could be in more trouble. That is the larger fear.

Read more:

China's Economy Faces Risk of Yearslong Real-Estate Hangover
https://www.wsj.com/articles/chinas-economy-faces-risk-of-yearslong-real-estate-hangover-11636372801
'Doomed to fail':
https://www.scmp.com/economy/china-economy/article/3155055/china-cracks-down-characteristic-towns-misused-land-real