A judge in Hong Kong today ordered one of China’s biggest property developers, Evergrande, to liquidate in light of its more-than $300bn debt burden and failure to come up with a restructuring plan.
The decision concludes an 18-month court proceeding initiated by an investor, Top Shine, during which the court granted seven extensions to Evergrande to restructure, The Guardian reports.
In delivering her ruling today, Justice Linda Chan said that “it is time for the court to say enough is enough”.
Evergrande can appeal, the newspaper reports.
The group’s troubles were compounded when its founder Hui Ka Yan became the subject of a criminal investigation in September last year.
Collapsing demand
The company is one of the highest-profile developers to suffer from the collapse of China’s debt-fuelled property bubble.
Founded in 1996, it grew fast as the country raced to urbanise, borrowing vast sums to build in many cities and selling homes off-plan.
But cashflow began to shrink in 2020 when the Chinese government moved to curb speculation in the property market by limiting bank loans and other measures.
Since then, demand for new homes has collapsed amid a glut of supply combined with China’s prolonged covid crisis.
Projects stalled as cash-strapped developers struggled to build the homes they had sold, leading to widespread mortgage boycotts.
Evergrande began defaulting on its debts in 2021, Reuters reports.
Demographic challenges
Writing in today’s China Daily newspaper, Liu Ligang, vice-president of Hong Kong Institution of International Finance, urged Beijing to restore confidence in the economy by investing in “soft infrastructure” such as education, healthcare, and research and development.
He said local governments could reduce the property surplus by buying land back or stopping sales.
Without mentioning Evergrande, he warned that the property sector still generated 24% of China’s GDP, contributed 20% of fiscal revenue, and stored 70% of household wealth.
He warned that weak demand for housing would be an ongoing problem, given China’s shrinking and ageing population.
China’s population shrank by 2.08 million last year, he said.
More starkly, he noted that the number of newlywed couples dropped by almost half in 2022 to below 7 million, compared to five years ago.
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