In a significant development, a Hong Kong court has issued a ruling for the liquidation of China Evergrande Group, amplifying the challenges in China’s financial landscape. The decision, likely to reverberate through the country’s already fragile markets, solidifies Evergrande’s status as a prominent symbol of China’s ongoing real estate crisis, causing economic strains and eroding consumer confidence.
Trading in Evergrande Property Services shares came to a halt following the issuance of the winding-up order. The liquidation process will involve provisional liquidators taking control and addressing various issues, including the leadership role of founder and Chairman Hui Ka Yan, as noted by Judge Linda Chan.
With a staggering 2.39 trillion yuan ($333 billion) in liabilities, Evergrande’s failure to reach a consensus with creditors, despite years of negotiations, underscores the severity of the challenges facing the real estate giant. The company’s struggles have been emblematic of the broader real estate crisis in China, contributing to a slowdown in economic growth and undermining consumer confidence.
Founder Hui Ka Yan, who was placed under police control in September on suspicion of committing crimes, adds another layer of complexity to the situation. The liquidation order follows Evergrande’s default on a dollar bond in December 2021, marking a precipitous fall from its position as the country’s largest builder by sales in the last decade.
Zerlina Zeng, a credit analyst at Creditsights Singapore LLC, commented on the development, stating, “The liquidation order is not entirely a surprise to the market given the creditors were still not able to agree on the restructuring terms.” She expressed skepticism about offshore creditors receiving substantial recovery proceeds from the liquidation order, given Evergrande’s primary assets being located on the mainland.
