The troubles of Chinese conglomerate Evergrande have dominated headlines after it warned once again that it could default on its astronomical debt because of a cash crunch.

Experts have characterized the firm’s struggles as a major test for Beijing that risks turning into China’s Lehman Brothers moment, sending shockwaves across the world’s second biggest economy.

This week could be critical for the company.

Evergrande Group will pay interest due Thursday on one of its bonds, but it’s keeping rattled investors guessing about the fate of second, bigger payment due this week, reports Laura He for CNN.

The troubled Chinese real estate conglomerate said Wednesday in a filing with the Shenzhen Stock Exchange that issues regarding a payment on a domestic yuan bond have been “settled through negotiations.”

Many questions remain unanswered, though. Evergrande did not elaborate on the terms of the payment. The amount of interest it owes on the bond is about 232 million yuan ($36 million), according to data from Refinitiv.

It was supposed to repay interest on some bank loans on Monday, according to Bloomberg. The news outlet recently reported that Chinese authorities have told major banks that they won’t receive those payments.

Evergrande did not immediately respond to a request from CNN Business for comment about those payments.

And interest payments totaling more than $100 million are due Thursday on two of the company’s bonds, according to data provider Refinitiv.

Here’s what you need to know about Evergrande, and how it got to where it is now.

What is Evergrande?

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.

Listed in Hong Kong and based in the southern Chinese city of Shenzhen, it employs about 200,000 people. It also indirectly helps sustain more than 3.8 million jobs each year.

The group was founded by Chinese billionaire Xu Jiayin, also known as Hui Ka Yan in Cantonese, who was once the country’s richest man.

Evergrande made its name in residential property — it boasts that it “owns more than 1,300 projects in more than 280 cities” across China — but its interests extend far beyond that.

Outside housing, the group has invested in electric vehicles, sports and theme parks. It even owns a food and beverage business, selling bottled water, groceries, dairy products and other goods across China.

In 2010, the company bought a soccer team, which is now known as Guangzhou Evergrande. That team has since built what is believed to be the world’s biggest soccer school, at a cost of $185 million to Evergrande.

Guangzhou Evergrande continues to reach for new records: It’s currently working on creating the world’s biggest soccer stadium, assuming that construction is completed next year as expected. The $1.7 billion site is shaped as a giant lotus flower, and will eventually be able to seat 100,000 spectators.

Evergrande also caters to tourists through its theme park division, Evergrande Fairyland. Its claim to fame is a massive undertaking called Ocean Flower Island in Hainan, the tropical province in China commonly referred to as the “Chinese Hawaii.”

The project includes an artificial island with malls, museums and amusement parks. According to the group’s most recent annual report, it started taking customers on a trial basis earlier this year, with plans for a full opening “at the end of 2021.”

How did it run into trouble?

In recent years, Evergrande’s debts ballooned as it borrowed to finance its various pursuits.

The group has gained infamy for becoming China’s most indebted developer, with more than $300 billion worth of liabilities. Over the last few weeks, it’s warned investors of cash flow issues, saying that it could default if it’s unable to raise money quickly.

That warning was underscored last week, when Evergrande disclosed in a stock exchange filing that it was having trouble finding buyers for some of its assets.

In some ways, the company’s aggressive ambitions are what landed it in hot water, according to experts. The group “strayed far from its core business, which is part of how it got into this mess,” said Mattie Bekink, China director of the Economist Intelligence Unit.

Goldman Sachs analysts say the company’s structure has also made it “difficult to ascertain a more precise picture of [its] recovery.” In a recent note, they pointed to “the complexity of Evergrande Group, and the lack of sufficient information on the company’s assets and liabilities.”

But the group’s struggles are also emblematic of underlying risks in China.

“The story of Evergrande is the story of the deep [and] structural challenges to China’s economy related to debt,” said Bekink.

The issue isn’t entirely new. Last year, a slew of Chinese state-owned companies defaulted on their loans, raising fears about China’s reliance on debt-fueled investments to support growth.

And in 2018, billionaire Wang Jianlin was forced to downsize his conglomerate, Dalian Wanda, as Beijing clamped down on firms borrowing heavily to push overseas.

In a note last week, Mark Williams, Capital Economics’ chief Asia economist, said that Evergrande’s collapse “would be the biggest test that China’s financial system has faced in years.”

“The root of Evergrande’s troubles — and those of other highly-leveraged developers — is that residential property demand in China is entering an era of sustained decline,” he wrote. “Evergrande’s ongoing collapse has focused attention on the impact a wave of property developer defaults would have on China’s growth.”

How is it trying to move forward?

Evergrande said Wednesday in a filing with the Shenzhen Stock Exchange that issues regarding a payment on a domestic yuan bond have been “settled through negotiations.”

The amount of interest it owes on the bond is about 232 million yuan ($36 million), according to data from Refinitiv.

While the news may placate investors, many questions still remain unanswered. Evergrande did not elaborate on the terms of the payment in its statement, and interest worth $83.5 million on a dollar-denominated bond is also due Thursday.

The company has not said anything publicly about what will happen to that payment.

On September 14, Evergrande announced that it had brought on financial advisers to help assess the situation.

While those firms are tasked with exploring “all feasible solutions” as quickly as possible, Evergrande has cautioned that nothing is guaranteed.

So far, the conglomerate has struggled to stem the bleeding, and has failed to find buyers for parts of its electric vehicle and property services businesses.

As of that filing, it had made “no material progress” in its search for investors, and “it is uncertain as to whether the group will be able to consummate any such sale,” it said.

The company has also been trying to sell off its office tower in Hong Kong, which it bought for about $1.6 billion in 2015. But that has “not been completed within the expected timetable,” it said.

How are investors reacting?

Evergrande’s problems spilled onto the streets last week when protests reportedly broke out at its headquarters in Shenzhen. Footage from Reuters showed scores of demonstrators at the site on Monday, accosting someone identified to be a company representative.

But shareholders have been wary for months: The stock has shed more than 80% of its value this year.

Earlier this month, Fitch and Moody’s Investors Services both downgraded Evergrande’s credit ratings, citing its liquidity issues. “We view a default of some kind as probable,” Fitch wrote in a recent note.

The situation also appears to be spooking investors in China more broadly, at a time when they’re already reeling from Beijing’s crackdown on private sector companies, particularly in the tech sector. The Hang Seng Index on Monday dropped 3.3%, suffering its worst decline in nearly two months, as Chinese banks, insurers and other real estate companies were slammed.

“In our opinion, how Evergrande credit stresses will be resolved will drive market sentiment,” Goldman Sachs analysts wrote recently, referring to the credit market and the broader economy. They added that the Chinese bond market could be hit and a loss of confidence could “spill over to the broader property sector.”

Wall Street appears to be more sanguine about the risks of contagion overseas.

“I don’t think the Evergrande meltdown, and the financial problems of Chinese property companies more broadly, will reverberate back on the US economy or markets,” Mark Zandi, chief economist at Moody’s Analytics, told CNN Business last week.

What could happen next?

Analysts expect the Chinese government to intervene to limit the fallout if Evergrande were to default. And authorities are clearly watching closely, while attempting to project calm.

Last week, Fu Linghui, a spokesperson for China’s National Bureau of Statistics, acknowledged the difficulties of “some large real estate companies,” according to state media.

Without naming Evergrande directly, Fu said that China’s real estate market had remained stable this year but the impact of recent events “on the development of the whole industry needs to be observed.”

Williams, of Capital Economics, predicts that the country’s central bank “would step in with liquidity support” if fears of a major default intensified.

Authorities are said to be taking action. Last week, Bloomberg cited anonymous sources as saying that regulators had enlisted international law firm King & Wood Mallesons, among other advisers, to examine the conglomerate’s finances. King & Wood Mallesons declined to comment.

According to the report, officials in Evergrande’s home province of Guangdong have already rejected a bailout request from its founder. Guangdong authorities and Evergrande did not respond to a request for comment.

But some suggest it may already be too late to save the company.

Evergrande’s financial problems have been widely dubbed by Chinese media as “a huge black hole,” implying that no amount of money can resolve the issue.

“We do ultimately expect that the government will intervene in Evergrande’s case, as it will not allow the company’s defaults to spread into the banking system,” said Bekink.

“The impacts from a large default by Evergrande would be remarkable.”

— Kristie Lu Stout, Julia Horowitz, Laura He and CNN’s Beijing bureau contributed to this report.

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