china evergrande liquidation hong kong

Symbol of the setbacks of the real estate sector in China, the Evergrande group will be liquidated. A Hong Kong court made the decision on Monday, January 29, after the failure of the real estate giant to present a convincing restructuring plan.

Evergrande was China’s largest developer, but accumulated debts until it had liabilities of more than $300 billion.

However, it is not immediately clear how a decision taken in the semi-autonomous Chinese region of Hong Kong can materialize in mainland China, where the group is based.

After the morning session adjourned, Fergus Saurin, a lawyer representing a group of creditors, told reporters that Evergrande had not “engaged in dialogue” with them. “There were attempts at dialogue at the last minute which led to nothing,” he said. “The company only has itself to blame for being liquidated.”

The shares of the Chinese real estate giant fell by more than 20% after the announcement of its liquidation. The Hong Kong Stock Exchange suspended trading of the stock.

A creditor filed a liquidation petition in a Hong Kong court against the developer last year, but proceedings dragged on as the parties tried to negotiate a deal.

The collapse of Evergrande, which defaulted for the first time in 2021 and was declared bankrupt in the United States, was closely followed by the Chinese authorities because the group was a pillar of the Chinese economy.

China’s construction and real estate sector accounted for about a quarter of China’s GDP, but Chinese President Xi Jinping said the debt accumulated by Evergrande and other real estate companies posed an unacceptable risk to China’s financial system and the overall economic health.

The authorities have gradually restricted developers’ access to credit since 2020, triggering a wave of payment defaults. At the end of June, Evergrande estimated its debts at $328 billion.