IMF warns of possible Evergrande fallout

The International Monetary Fund has warned that if the problems surrounding China's Evergrande Group spread to the broader real-estate sector, it could affect the global financial market.

The IMF published its latest "Global Financial Stability Report" on Tuesday. It warns that Evergrande could be headed for a default.

The economists say the impact of Evergrande's troubles has so far been limited. But if the situation worsens, there is a risk that broader financial stress will emerge.

That would have implications for China's economy and financial sector, as well as global markets.

The economists fear that if credit worries spread to the wider real-estate sector, losses at financial institutions could increase, including those at so-called shadow banks.

They say lower housing prices could also hurt consumer spending and damage the economy.

But in the short term, they say Chinese policymakers have the tools to reduce any serious impact on the economy.

Longer term, the IMF says Beijing should strengthen frameworks to deal with corporate restructuring and insolvency. It says support measures that are too broad could heighten future risks.