Chinese real estate giant Evergrande ran out of cash and defaulted in 2021, after a Hong Kong court ordered the company into liquidation on Monday, saying it was unable to submit a concrete restructuring plan to the court. It was decided to be demolished.
The judge’s order is a nail in the coffin for Evergrande, once China’s largest real estate company, which now owes more than $300 billion after two years of impasse. It also comes as a blow to Chinese and foreign investors who have lost confidence in the Chinese economy over the past few years, as the pace of Chinese growth has slowed in a way that most economists judge to be irreversible. This will be another blow.
“The time has come for the court to say enough is enough,” Hong Kong Judge Linda Chan said in court on Monday.
Chan has appointed Alvarez & Marsal as liquidator, who could be in charge of Evergrande’s new restructuring plan while Evergrande chairman Hui Kar Yang is under investigation. The company did not provide details about what crime Mr. Hui was being investigated for, but said he was under police surveillance.
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Evergrande Chief Executive Officer Xiu Shean told Chinese media that Evergrande will ensure the housing construction project continues despite the Hong Kong judge’s order, Reuters reported.
He said the liquidation order will not affect the operations of Evergrande’s land and sea divisions.
Following Chan’s appointment, Tiffany Wong, Alvarez & Marsal’s managing director, said the company’s priority is to “preserve, restructure and continue operations as much as possible.” said. He added: “We will continue to pursue a systematic approach to preserving value and returning it to our creditors and other stakeholders.”
newsweek Evergrande and Wong of Alvarez & Marsal were contacted for comment via email Monday morning.
It is not yet clear whether Chinese courts will recognize the Hong Kong judge’s ruling, given the political and financial implications this will have for China.
The Chinese government is seeking to put the economy on firmer footing in the wake of a crisis in the real estate sector, which has been a key driver of the country’s impressive growth over the past few decades and currently accounts for more than a quarter of the country’s total economic activity. ing.
Evergrande’s possible liquidation brings further uncertainty to China’s fragile economy, weakened by an ongoing real estate crisis, soaring local government debt, a weak yuan, an aging workforce and slowing domestic demand. right.
in a recent interview newsweek, Craig Singleton, senior China fellow at the nonpartisan Foundation for Defense of Democracies, said the Chinese government is “in damage control mode, trying to project a sense of stability to the international community while grappling with myriad domestic challenges.” “If ever the cliché ‘Investor beware’ applies, it’s now,” he said. newsweek.
Updated 01/29/24 9:56 AM ET: This story has been updated with additional information.
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Newsweek is committed to challenging conventional wisdom, finding common ground and finding connections.