The Evergrande Group, a troubled real estate giant in China, has been ordered to liquidate by a Hong Kong court after failing to present a viable plan to restructure its $300 billion in debts. The ruling comes after 18 months of legal battles with creditors, and follows the company’s default on repayment to international investors in 2021.
The decision is likely to have a significant impact on the world’s second-largest economy, as it comes amidst a series of warning signs including challenges such as crackdowns on private industry, population decline, and an exodus of foreign capital. China’s official GDP growth of 5.2 percent in 2021 was the worst performance in decades, excluding the COVID-19 pandemic.
Following the ruling, the fate of Evergrande’s assets is uncertain, with questions arising about whether mainland courts in China would sanction liquidators seizing the developer’s assets in the country. While China recently signed a mutual recognition agreement on insolvency and restructuring with semi-autonomous Hong Kong, there is a distinction between Hong Kong’s common law system and China’s communist party-controlled courts.
The ruling is likely to deal a fresh blow to confidence in China’s economy, as it comes on the heels of more than 50 Chinese real estate developers defaulting or missing payments in the past three years. Hong Kong-listed shares in Evergrande plunged more than 20 percent following the ruling, highlighting the significant impact of the court’s decision.