Bankers and fund managers are now rushing to weigh the damage of what could become one of the biggest corporate restructurings in China’s history, involving over $50 billion of outstanding debt — including more than $7 billion held by lenders and bond investors overseas. They warn that Vanke’s worsening problems will send ripples throughout China’s economy and its financial system, threatening losses for banks and ramping up pressure on the long-struggling property sector.

The chaos at Vanke has an unmistakable sense of deja vu for investors who endured around $130 billion of defaults over the past four years, as the property crunch toppled almost all of China’s once high-flying developers. But while giants like China Evergrande Group had binged on debt and spent wildly, Vanke was considered safer — and better connected. Some investors even considered it too big to fail.

That idea has quickly been abandoned.

He noticed a simple problem: The property company had an asset-liability ratio of around 70%, meaning it had $100 to cover every $70 of debt. But real estate prices had been falling for years, with a gauge of second-hand home prices in Shenzhen down more than a third from its peak. How could banks be sure that Vanke’s assets would continue to be worth enough to cover its debts?