A Hong Kong court ordered China Evergrande, the world’s most heavily indebted real estate developer, to undergo liquidation following a failed effort to restructure $300 billion owed to banks and bondholders that fueled fears about China’s rising debt burden.
“It would be a situation where the court says enough is enough,” Judge Linda Chan said Monday. She said it was appropriate for the court to order Evergrande to wind up its business given a “lack of progress on the part of the company putting forward a viable restructuring proposal” as well as Evergrande’s insolvency.
China Evergrande Group is one of the biggest of a series of Chinese developers that have collapsed since 2020 under official pressure to rein in surging debt the ruling Communist Party views as a threat to China’s slowing economic growth.
But a crackdown on excess borrowing has tipped the property industry into crisis, making it a drag on the economy, as scores of other developers ran into trouble, their predicaments rippling through financial systems in and outside China.
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 recognized bankruptcy rulings in Hong Kong but analysts say Evergrande’s is something of a test case.Let’s see how that goes?
