Chinese real estate developer Evergrande Group filed for bankruptcy protection under Chapter 15 of the U.S. Bankruptcy Code on Thursday in New York State, according to court documents seen by Bloomberg.

This chapter protects the company's assets in the US, while negotiating restructuring agreements in other jurisdictions.

Evergrande's request refers to the restructuring procedures taking place in Hong Kong and the Cayman Islands.

According to Bloomberg, the Chinese construction company has been negotiating with China for months.

Wednesday saw the second monthly drop in real estate prices in China since July, a sign of a worsening crisis in a crucial sector for the world's second largest economy.

The fall in prices comes at a time when the sector is facing a liquidity crisis, with several Chinese construction companies at risk of defaulting.

Last week, Country Garden, one of the country's largest construction companies, failed to meet the coupon payments on two bonds. The group is in danger of officially defaulting after a 30-day grace period.

As in the case of Evergrande, whose liabilities exceed 300 billion euros and which had to reach a debt restructuring agreement with bondholders, the collapse of Country Garden would have catastrophic repercussions on the financial system and the Chinese economy.

This week, the wealth management company Zhongrong International Trust, which has a large exposure to the real estate sector, also stopped paying dividends on some investment products.

The unprecedented liquidity crisis in Chinese real estate was prompted by a campaign launched by Beijing to reduce leverage levels in the sector, which accounts for a quarter of China's Gross Domestic Product (GDP).

China's housing reform in the late 1990s led to a boom in the sector, fueled by social norms. Home ownership is often a prerequisite for marriage.

However, in 2021, Chinese regulators began requiring construction companies to have a 70% ceiling on the ratio of liabilities to assets and a 100% limit on net debt to assets, sparking a liquidity crisis in the sector.

The lack of liquidity in the sector meant that several construction projects across the country were forced to stop, resulting in a "mortgage boycott" last summer, which spread to more than a hundred cities, with buyers of unfinished apartments stopping paying their monthly installments to the banks.

In recent months, the government has changed course and announced a number of support measures, including the opening of credit lines, whose priority objective is to finish projects that have not been completed.