SHANGHAI (Reuters – Chinese realty firms saw shares slide on Thursday, as investors worried about a debt crisis rippling through developers like China Evergrande Group. The move came just days after the sector had been hit with new ratings downgrades.

Evergrande has over $300 billion of liabilities and more than 1,300 projects in real estate in more than 280 cities. This week’s third round missed interest payments. Other firms warned that they might default.

Growing risks in the sector led rating agency S&P Global (NYSE:) to deliver fresh downgrades to two of the sector’s bigger firms, Greenland Holdings – which has built some of the world’s tallest residential towers – and E-house, and warn it could cut their ratings further.

Investors have been increasingly concerned about the possibility of policy easing being used to stabilize a slowing recovery in China’s second largest economy. New data released on Thursday revealed that China’s factory gate prices rose at an unprecedented pace in September, due to rising raw material prices.

Pinpoint Asset Management’s chief economist Zhiwei Zhiwei Zhang stated that persistent inflationary pressure will limit any monetary policy easing.

He stated that “But, the most important policy for the property sector (and the world) is not monetary but regulation related to the supply of bank loans to developers and home buyers.”

“I believe the government has the ability to relax those policies in order to support the property sector. But, the big question here is whether or not they want to. Their policy position seems to be quite solid so far.”

The sub-index which tracks the shares of Chinese property developer fell by nearly 3% at midday on Thursday. Meanwhile, the broad CSI300 Blue-chip Index dropped 0.31%. The CSI300 has seen a 5.5% drop in property shares, while the shares of property have dropped nearly 19%.

After recent large price moves, the onshore bond market saw relatively little movement. Guangzhou R&F’s 6.7% April 2022 exchange-traded bond rose 0.34% but was still trading at a discount of more than 35% to its face value.

According to data from the exchange, Shanghai Shimao Co’s 4.65% January 2022 Bond was the largest loser of Shanghai Stock Exchange-traded Corporate Bonds. It fell 3.16%, to 92.48 Yuan.

Public holiday in Hong Kong: Thursday, markets were closed.

The risk premium on Chinese investment grade firms that tend to be the most financially sound, grew due to global concerns about the possibility of China’s property sector credit risks spilling over into the wider economy. It was near its highest in two months, Wednesday night U.S. Time.

However, Wednesday’s spread on the equivalent high yield or “junk”-rated index which tracks companies such as Evergrande dipped back but still remained at all-time highs.