What happens to the Chinese real estate market with the liquidation of Evergrande

The death knell has sounded for China Evergrande Group, what was once known as China's largest real estate group.
After multiple delays in the payments of its debts (which had exceeded 300 billion dollars), and very small glimmers of hope alternating with frantic months, a Hong Kong court ordered the liquidation of the company, which remained broke and ended up in default in 2021 In a small courtroom on the 12th floor of the High Court building of the former British concession, Evergrande's lawyers tried hard to obtain a settlement with creditors.
They argued that a liquidation of their client would damage the business and would not help the creditors recover the money invested.
At the end of a 40-minute debate, bankruptcy judge Linda Chan, who presided over the case, instead decided to issue an order ordering Evergrande to close its operations, citing the company's inability to present a concrete proposal to the court in a year and a half of time available.
Meanwhile, investors around the world had scooped up the company's discounted IOUs, banking on the fact that the Chinese government would eventually intervene to save it.
Well, that wasn't the case.
Evergrande in liquidation: what happens now But what does the Hong Kong court's decision mean in concrete terms? That Evergrande, unable to pay its debts and operate normally but still functioning, will presumably face a prolonged period during which it will have to dismantle its assets.
And thus all his projects, which span hundreds of cities and businesses unrelated to the real estate sector, including an electric vehicle company.
It is likely, the New York Times pointed out, that the judicial authorities' decision could have repercussions on China's real estate and financial markets (which are already nervous about the Chinese economy).
Technically, once a winding up order is issued a provisional liquidator is appointed and then an official liquidator to take control of the company and prepare to sell its assets to repay its debts.
Liquidators could propose a new debt restructuring plan to offshore creditors, should they determine that the company has sufficient assets.
Most of the group's assets have been sold or seized by creditors, leaving its two Hong Kong-listed units, namely Evergrande Property Services Group and Evergrande New Energy Vehicle Group.
Their combined market capitalization fell to $973 million.
The rise and fall of the Evergrande Group – as well as other Chinese economic players – has built and overpromised, borrowing money to build apartments that were not finished and thus leaving hundreds of thousands of homebuyers waiting to get their units.
China's real estate market today shows little sign of returning to the boom times, in part because Beijing wants to redirect economic growth away from construction and investment in other sectors.
As if that weren't enough, growing diplomatic tensions between the United States and China, which have led to large outflows of foreign money from China, aren't helping.
Investors are now awaiting the resolution of the Evergrande case to understand how China will handle disputes over its defaulting companies.
There would be dozens of them, beyond the Wall, in the real estate sector alone.
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Author: A.W.M.

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