China’s largest property developer, Country Garden, said Feb. 28 that a liquidation petition has been filed by a creditor against it for failure to meet its debt obligations worth HK$1.6 billion ($204.4 million).

This comes after China’s second-largest property developer, Evergrande Group, collapsed after a Hong Kong court in January ordered liquidation of the group following its failure to reach a restructuring deal with creditors.

However, it remains unclear how the Evergrande court ruling will play out, as Hong Kong operates under a legal system that is separate to that of mainland China, while most of Evergrande’s assets are in mainland China.

Although many people in mainland China had expected the Chinese government to hold the bottom line on the delivery of home presales and prevent a snowball effect in the property sector, the liquidation petition against Country Garden has dented the fragile confidence of home buyers, Chinese steel market sources said.

“Home buyers will continue to shun the downward trending property market this year, and without homes sales recovery, the whole property sector is unlikely to walk out of spiral downward trend,” said one steel trading source, adding that the property sector will extend a long-run drag on China’s steel demand.

China’s property sector is the largest consumer of steel demand and is also a huge contributor to the country’s economy.