Evergrande’s liquidation is a new low in China’s property crisis

“Enough is enough,” declared a Hong Kong judge on January 29th of Evergrande, a failing Chinese property behemoth, and its two-year struggle to avoid repaying its creditors. In a landmark ruling, the court ordered the liquidation of the firm, which is the world’s most indebted property developer, with over $300bn in liabilities. A provisional liquidator will be appointed, assuming management of the company. Foreign creditors will have to recoup losses from a firm that holds most of its assets in mainland China. The ruling thus pits Hong Kong’s courts against a Chinese government anxious to restore public confidence in a struggling market.

No company has been more central to China’s property crisis, which kicked off in mid-2021 when Evergrande first showed signs of weakening. Rules intended to wean developers from debt pushed the company to default later that year. Since then most of China’s listed property developers have either failed to pay back their investors or been forced into restructuring. Their access to credit has been virtually cut off, causing builders to stop working on projects. Prospective homebuyers have delayed purchases, leading to a 6.5% decline in the sale values, year on year, and unnerving a population that stores most of its wealth in property.