Only two years ago, real estate tycoon Xu Jiayin hovered at the top of China’s rich lists as a model of the country’s swaggering, newfound wealth.

Evergrande, the company he founded in 1996, was among China’s largest developers. It built and sold millions of apartments each year to middle-class Chinese families eager to invest their savings in a seemingly endless housing boom. He owned a successful soccer club, showed up at high-level political meetings wearing ostentatious designer belts and took his private jet to Paris on a whim.

Now, Xu’s reputation, along with his property empire, is crumbling under more than $300 billion in liabilities. After years of ratcheting up debt to fund expansion, the sprawling conglomerate’s financially risky behavior became too dangerous for authorities to ignore earlier this year, when China’s central bank ordered the company to end its debt addiction.

Evergrande said Sept. 22 that it will make a payment due on a domestic bond calming fears of an imminent default that could unleash financial chaos globally. (Reuters)

The resulting liquidity crisis is widely expected to end in one of China’s largest defaults, in what would be a severe shock for the country’s property market and a blow for the Chinese Communist Party’s campaign to tackle financial risks without harming economic growth or the everyday livelihoods of Chinese households. Global stock markets tanked Monday amid growing panic of wider contagion starting with foreign creditors left without payments.

Fear of widespread fallout from a default leaves Chinese regulators with a dilemma, analysts say. They could intervene to support creditors but that would reinforce bad corporate behavior caused by assumptions that the government will step in whenever the situation gets out of hand. Or they could choose not to prevent the default and risk roiling markets and wider financial distress.

The question is how much pain is the government willing to inflict to teach Evergrande and the sector a lesson, said Travis Lundy, an independent analyst based in Hong Kong. “It was always a situation of when, not if, real estate expansion would slow down, because it had gotten clearly out of hand,” he said.

Yet, ending decades of rising property prices will not be a popular decision. “How do you prick a bubble that every single person, from homeowners to local governments, doesn’t want pricked? Nobody really wants to see this unwind. If this does, there is going to be a lot of pain,” Lundy said.

When development stopped on the Evergrande Technology and Tourism City apartment complex in Wuhan, buyers began visiting the abandoned construction site to take photos of their incomplete future homes in a bid to draw official attention on Chinese microblog Weibo.

“A whole family emptied out our wallets to buy this home, and we have a home loan of 6,000 yuan per month,” one buyer wrote in the owners’ group. “We don’t dare to get sick, take a break from work or make big purchases. . . . Complaints to the authorities all get passed around like a football. What are we thousands of owners to do?”

So far, the Chinese leadership appears inclined to allow a default. “Beijing would only be compelled to step in if there is a far-reaching contagion causing multiple major developers to fail and posing systemic risks to the economy,” S&P Global Ratings wrote in a note on Monday.

An announcement by Evergrande’s main Hong Kong-listed unit on Wednesday that it would make an interest payment on $36 million of yuan-denominated bonds the next day eased some fears of impending shocks to the global financial system. The company has not said whether it would meet payments on larger dollar-denominated bonds due on Thursday and later this month.

That Beijing is even considering allowing such a large company to go bankrupt, something that would have been unthinkable a decade ago, reflects a shift in government priorities, analysts said.

President Xi Jinping has made tackling financial risks one of three “tough battles” for the party, alongside reducing air pollution and eliminating poverty. Last year, authorities set “red lines” to force real estate developers to drastically reduce debt, signaling a reckoning for highly leveraged companies like Evergrande.

Evergrande is unlikely to become China’s “Lehman moment,” but the strictness of government policies may create unintended consequences for the property market, said Zhu Ning, a scholar at Shanghai Jiao Tong University and author of “China’s Guaranteed Bubble.”

“Everyone is saying that the credit-tightening policies are too strong and have gone on for too long,” he said. “It’s putting too many brakes on the economy. I worry about growth losing speed much faster than expected.”

Evergrande’s market capitalization has plummeted from nearly $40 billion last year to under $4 billion. The cash crunch has halted construction at dozens of building sites across the country. Last week, angry suppliers and employees swarmed the group’s headquarters in Shenzhen demanding payments.

Evergrande’s operations span hundreds of projects across dozens of cities, making it difficult for the stability-obsessed party to ignore the public outcry. The regulators’ priority will be to ensure that home buyers and suppliers are not left empty-handed; creditors will be a secondary concern, analysts argue.

For a Chinese leadership that prides itself on successful stewardship of China’s economy after the 2008 global financial crisis, the comparisons to Wall Street’s Lehman Brothers crisis are especially unwelcome.

“It’s not the same as just letting Lehman go,” said Zhu, adding that the Chinese government takes a fundamentally different approach to the United States, because of the political and social importance of implicit guarantees of wealth.

Throughout the company’s history, Xu has been adept at using Evergrande’s once easy access to capital to enter emerging sectors prioritized by Beijing. But Evergrande’s complex web of business, once a way for the company to grow, is now proving a liability as the company struggles to find buyers for multiple businesses with lackluster track records.

A health-care unit, which was listed separately in Hong Kong, was rebranded last year as an electric vehicles maker. The automaker-to-be began construction on multiple factories across China and pledged to manufacture 1 million cars by 2025. It has yet to sell a vehicle.

In recent weeks, Xu, who stepped down as chairman of Evergrande’s main unit in August, has made a show of taking responsibility for the company’s debt crisis.

The company jet — presumably carrying Xu — flew from Shenzhen to Beijing and back in one day last week, according to data from Flightradar24. In a Mid-Autumn Festival letter to employees on Tuesday, Xu promised to put an end to the group’s “dark hour,” finish incomplete apartments and repay suppliers. Last week, Ding Yumei, Xu’s wife, bought $3 million of Evergrande investment products.

But some of the company’s efforts to raise cash by asking for loans or encouraging employees to buy wealth management products have only served to sharpen focus on its methods for raising capital off the books.

One lender named Yang Yang who agreed to transfer an Evergrande subsidiary 10 million yuan (about $1.5 million) in July took to social media in frustration after the company failed to make its promised repayment in 10 days.

“Evergrande has all kinds of fundraising channels to avoid oversight,” he said in an interview. “Before they always repaid, but not this time. It’s totally shameless.”

In response to mounting criticism, online censors have stifled discussion of potential bankruptcy for Evergrande. At least 30 financial blogs were shuttered in early September as part of an effort to “rectify” online discussion.

The potential hit to family incomes from Evergrande’s downfall comes as Xi has preached a gospel of “common prosperity” and launched crackdowns spanning ride hailing to private tutoring in the name of ensuring social stability.

But the ambitious agenda has raised fears that the basket of policies to target a looming demographic crisis and stark inequality could backfire and intensify financial burdens for everyday Chinese households.

One joke widely shared on social media read: “This year’s most tragic household: the husband lost his job as a real estate agent, the wife lost hers in education; they bought an Evergrande house and speculated on Internet stocks, before unexpectedly having a third child.”

Pei Lin Wu in Taipei contributed to this report.