China Evergrande said it would continue to operate despite a Hong Kong court ordering the firm to be liquidated due to legal action by some foreign creditors. The legal proceedings were brought by a Samoa-registered investor in one of Evergrande's subsidiaries. A crackdown on real estate speculation caused a deepening property crisis, leaving Evergrande with $300 billion in debt. The firm defaulted on its offshore debt obligations, and a debt restructuring proposal was rejected last month by creditors.
Monday's winding-up hearing had been pushed back from December after Evergrande's lawyers argued that none of its creditors were seeking the liquidation of the firm, which has $240 billion of assets. However, it is unclear how the ruling would affect Evergrande's vast operations in the Chinese mainland. The order kickstarts a long process that should see Evergrande's offshore assets liquidated and its management replaced.
The liquidators would try to sell off Evergrande's assets to pay its creditors, investigate the company's affairs, and could refer any suspected misconduct to Hong Kong prosecutors. The liquidation of Evergrande's mainland assets could be a major setback for China's economy, already struggling to recover from a draconian zero-COVID policy. Much of the $300 billion owed by Evergrande was deposits paid by ordinary Chinese citizens on new-build apartments.
China's real estate sector has been a major engine of growth over the past two decades, helping Beijing's leaders to achieve double-digit economic growth at times. However, several other property developers have been forced into bankruptcy, and spending by construction firms has dropped. Last year, sales of new homes from the 100 biggest real estate firms fell by more than a third. The country's local governments are heavily indebted and have been forced to cut spending.
https://www.dw.com/en/china-evergrande-what-next-after-court-orders-liquidation/a-68089490
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