China’s largest private developer, Country Garden, is seeking to delay the payment of private debt for the first time, the latest sign of a suffocating cash crunch in the real estate sector that is forcing Beijing to intervene, Reuters reported.

Adding to concerns about the risk of contagion was the default on some investment products by a large Chinese trust that has traditionally had significant exposure to real estate, Zhongrong International Trust Co.

Analysts have warned that an increase in defaults in the case of trusts, also known as shadow banks, which have close ties to the domestic real estate sector, will further affect the world’s second-largest economy.

Concerns about the risks of contagion are spreading across global markets, putting pressure on China’s government to support the ailing real estate sector, which accounts for about a quarter of the economy.

Country Garden’s woes, once seen as a more financially sound developer, could also put off homebuyers and financial firms, with several private developers close to a tipping point that could soon materialize without Beijing’s support.

China’s real estate sector has been hit by falling sales, tight liquidity and a series of developer defaults since late 2021, with China Evergrande Group at the center of a debt crisis.

Weak external demand, weak domestic consumption and lingering problems in the real estate sector have been the main factors behind China’s struggles to recover from the pandemic.

Two Chinese listed companies said over the weekend that they had not received payments for investment products from Zhongrong International Trust Co.

Trust firms, or shadow banks, operate outside many of the rules that govern banks, channeling revenues from financial products sold by banks to developers and other sectors that do not have direct access to bank financing.

Concerns about the enormous influence of China’s shadow banks, a $3 trillion industry roughly the size of Britain’s economy, for property developers have grown in the past year as the sector has lurched from one crisis to another.

JPMorgan said in a research note on Monday that rising trust defaults would directly reduce China’s economic growth by 0.3 to 0.4 percentage points and that a “vicious cycle” of financing property problems was expected.

“Beyond the obvious financial risks and their transmission, the latest wave of defaults by wealth management firms on trust products is likely to have some material implications for the broader economy,” Nomura said in a statement.

CRITICAL MOMENT

A source with direct knowledge said on Monday that Country Garden had offered lenders a three-year extension of its 3.9 billion yuan of private bonds maturing on Sept. 2 in seven tranches.

Country Garden declined to comment.

In separate statements over the weekend, the developer said it would suspend trading in 11 of its debt bonds from Monday, which traders said usually signals plans to seek an extension to the payout.

Country Garden may have to pay more than 9 billion yuan ($1.25 billion) in debt in September alone, Reuters estimates.

The bond issuance suspension comes after Chinese newspaper Yicai published an article on Friday that the company was set to restructure its debt after failing to make two-dollar coupon payments on bonds due Aug. 6, totaling 22, 5 million dollars.

Shares in the property developer fell 18.4 percent to $0.8 a unit on Monday, undercutting the Hang Seng Mainland property index, which fell 3.7 percent.

Country Garden shares have lost 50% this month.

Country Garden’s offshore bonds also fell, with some earlier trading at the low end of 6 cents on the dollar. Since then, most have gotten a little stronger.

Its woes add to concerns about the problems spreading to the housing market, which is already struggling with weak demand from buyers.