A Hong Kong court on Monday ordered the liquidation of troubled Chinese real estate giant Evergrande after it failed to present a convincing restructuring plan, a symbol of the sector's problems in China.
• Also read: The Chinese real estate giant Evergrande files for bankruptcy in the USA
• Also read: One of China's largest developers collapses in the stock market crisis
Evergrande was China's largest real estate developer. But he accumulated debt until he had liabilities of over $300 billion.
It has thus become a symbol of the real estate crisis that has been going on for several years in the world's second largest economy.
“(Considering) the apparent lack of progress by the company in presenting a viable restructuring plan. (…) I think it is appropriate for the court to make a judgment to liquidate the company and that is what I order,” said Judge Linda Chan.
The judge is expected to present the details of her ruling in the afternoon and could appoint an insolvency administrator for Evergrande.
But it is not immediately clear how a decision made in China's semi-autonomous Hong Kong region could be implemented in mainland China, where the group is based.
“Today's court decision is contrary to our original intention (…) It is extremely regrettable,” Evergrande general manager Shawn Siu responded to the Chinese business media 21st Century Business Herald.
After the morning session was adjourned, Fergus Saurin, a lawyer representing a group of creditors, told reporters that Evergrande had not entered into “dialogue” with them.
“There were last-minute attempts at dialogue that went nowhere,” he said. “The company has only itself to blame for the liquidation.”
Exchanges suspended
Last year, international creditors filed a liquidation application against the Evergrande Group in a Hong Kong court. But the process dragged on as the parties tried to negotiate a settlement.
After the liquidation announcement, Evergrande shares fell more than 20% on the Hong Kong Stock Exchange, halting trading of the stock.
“Trading in the securities of (…) Evergrande Property Services Group Limited was suspended at 10:19 a.m. local time (2:19 a.m. GMT), the Hong Kong Stock Exchange said.
The latter also suspended the listing of the group's electric vehicle subsidiary, Evergrande NEV.
The collapse of Evergrande, which became insolvent for the first time in 2021 and was declared bankrupt in the USA, was followed closely by the Chinese authorities because the company was a pillar of the Chinese economy.
China's construction and real estate sector accounted for about a quarter of China's GDP.
For decades, new housing in China was paid for by owners before construction, and groups could easily finance their new projects with credit.
Falling price
But the sector's massive debt has been seen by those in power in recent years as a major risk to the country's economy and financial system.
Therefore, starting in 2020, Beijing gradually tightened the conditions for access to credit for real estate developers, which dried up the sources of financing for already indebted corporations.
At the end of June, Evergrande estimated its debt at $328 billion.
China has repeatedly announced measures to rescue its real estate sector, but the results have had little impact so far.
According to official figures, China's major cities saw property prices fall again in December compared to the previous month.
Of the 70 cities that make up the official reference indicator, 62 were thus affected (compared to 33 in January 2023, a sign of a deterioration in the situation).
Chinese banks lent nearly 10,000 billion yuan (1,290 billion euros) to the real estate sector last year, according to data released last week.