Evergrande liquidation ordered, casting shadow on China’s property sector
Hong Kong Court orders liquidation of debt-laden China Evergrande Group amid economic concerns
In a significant move, a Hong Kong court has mandated the liquidation of China Evergrande Group, the world’s most indebted real estate firm, after its attempt to restructure a staggering $300 billion in debts proved unsuccessful.
The court’s decision comes amid a broader financial crisis within China’s property sector, which has seen numerous developers crumble under the weight of excessive debt since 2020.
China Evergrande Group is one of the biggest of a series of Chinese developers that have collapsed since 2020 under official pressure to rein in surging debt the ruling Communist Party views as a threat to China’s slowing economic growth.
But a crackdown on excess borrowing has tipped the property industry into crisis, dragging on the economy. Scores of other developers have run into trouble, their predicaments rippling through financial systems in and outside China.
Global financial markets were rattled earlier by fears an Evergrande could cause global shockwaves. But Chinese regulators said risks could be contained. Only a few billion dollars of Evergrande’s debt was owed to foreign creditors.
The decision to liquidate was announced by Judge Linda Chan, who cited the company’s inability to present a feasible plan for restructuring its debts and its current state of insolvency.
The repercussions of this liquidation on China’s financial system remain uncertain.
Following the announcement, Evergrande’s shares in Hong Kong plummeted nearly 21% and were subsequently suspended from trading. Despite this, the broader market appeared less affected, with Hong Kong’s main index, the Hang Seng, showing an increase of 0.9%. Moreover, other property developers in the region, including China’s largest real estate company, Country Garden, and Sunac China Holdings, experienced gains in their stock prices, rising 2.9% and 4%, respectively.
Evergrande CEO Shawn Siu told Chinese news outlet 21Jingji that the company feels “utmost regret” at the liquidation order.
Siu said that Evergrande will strive to continue smooth operations and deliver properties to buyers.
Source: Turkiye Today with AP
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