1/29/2024: Evergrande is Ordered to Liquidate
A Hong Kong court has ordered China's Evergrande Group, the globe's most heavily indebted real estate firm with liabilities exceeding $300 billion USD, to liquidate. Most of Evergrande's assets are located in China, and it seems that only its international assets are set for liquidation. It’s unclear if Hong Kong’s court order can be enforced in China and Evergrande’s CEO said they will work on finishing up the 6 millions units they are still building in China. Foreign creditors and bondholders are screwed and the fallout is likely to severely impact Evergrande's subcontractors, lenders, and homebuyers in China.
Evergrande's $300B debts is astronomical, almost rivaling Hong Kong's GDP, which stood at about $360 billion in 2022. Furthermore, Evergrande is not an isolated case of distress in the Chinese property market. Another major developer, Country Garden, is also in default. Investment giants like Blackrock, HSBC, and UBSwere the largest buyers of Evergrande’s bonds and their clients are probably not happy about these investments. This upheaval suggests a potential shrinkage in capital market accessibility for Chinese firms going forward. The pivotal question now is whether China can maintain its economic growth with diminished foreign investments. We will probably know the answer in the next decade and we are likely to see more property developer implosions in the next couple of years.