China Evergrande ordered to liquidate by Hong Kong court

“The company has failed to engage with us. There has been a history of last-minute engagement which has gone nowhere,” he said.

Saurin said that his team had been working in good faith in the entire process and that Evergrande “only has itself to blame for being wound up”.

The company first defaulted on its financial obligations in 2021, just over a year after Beijing clamped down on lending to property developers in an effort to cool a property bubble.

It’s unclear how the liquidation order will affect Evergrande’s vast operations in the Chinese mainland. As a former British colony, Hong Kong operates under a legal system that is separate, though increasingly influence by, communist-ruled China’s.

In some cases, mainland courts have recognised bankruptcy rulings in Hong Kong but analysts say Evergrande’s is something of a test case.

Real estate drove China’s economic boom, but developers borrowed heavily as they turned cities into forests of apartment and office towers. That has helped to push total corporate, government and household debt to the equivalent of more than 300 per cent of annual economic output, unusually high for a middle-income country.

Others developers including Country Garden, China’s largest real estate developer, have also run into trouble, their predicaments rippling through financial systems in and outside China.

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Evergrande’s Hong Kong-listed shares plunged nearly 21 per cent before they were suspended from trading on Monday. The benchmark Hang Seng index rose 1 per cent after the ruling, while other property companies’ shares advanced. Country Garden gained 2.9 per cent and Sunac China Holdings jumped 4 per cent.

The fallout from the property crisis has also affected China’s shadow banking industry – institutions that provide financial services similar to banks but operate outside of banking regulations, such as Zhongzhi Enterprise Group. Zhongzhi, which lent heavily to developers, said it was insolvent.

AP

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