And that’s not to mention the Chinese real estate giant Evergrande Group, teetering on the edge of imminent delisting from stock exchanges. This follows a string of financial misfortune, leading to a winding-up order granted in Hong Kong’s High Court. The firm — known for its unusual business model — was once valued at more than $50 billion. Now, it’s up against the challenge of reorganizing its huge debts, which total about $45 billion. More than a delisting This looming delisting is a huge reversal of fortunes for what was once China’s largest property developer.
Founded by Hui Ka Yan, who rose from humble origins in rural China to become one of Asia’s wealthiest individuals, Evergrande’s financial woes are striking. In 2017, Hui’s fortune reached an estimated $45 billion, making him a prominent figure on Forbes’ list of Asia’s richest. That wealth has long since melted away, with claims that his net worth has dropped below $1 billion.
Evergrande’s woes first really started to spiral upward after its stock was suspended from trading due to a court ruling. The suspension placed the company in a severe cash crunch. It was simply unable to produce a credible plan to address those billions in foreign liabilities. As a result, the High Court’s winding-up order has thrust Evergrande into one of the most extensive liquidation proceedings in recent memory.
The company’s vast empire extended beyond real estate, encompassing an electric car manufacturer and Guangzhou FC, one of China’s most successful football teams. Despite an enviable portfolio, Evergrande was unable to avoid the fiscal apocalypse. As late as earlier this year, Guangzhou FC was threatened with expulsion from the football league for not paying off debts.
Meanwhile, Evergrande is facing increasing difficulty in relieving its overwhelming liabilities. Most recently, it has only been able to sell off $255 million of its assets. Hui Ka Yan’s personal estate Liquidators are probing into Hui Ka Yan’s personal assets. Their purpose is to return money to defrauded creditors and recuperate some fraction of their sunk investments. The next hearing in the liquidation process is set for September, where more news is expected to come to light.
The ripple effects of Evergrande’s collapse extend beyond its own balance sheet, as analysts express concerns over the broader implications for China’s economy. “The property slump has been the biggest drag on the economy, and the ultimate reason why consumption is suppressed,” noted Ms. Wang, an economic expert.
The sentiment among economists remains cautious. Professor Qiao remarked on the state of the property sector: “The whole property sector has been in trouble. More Chinese property firms will collapse.” This perspective aligns with the outlook of Jackson Chan, who stated, “We think the bottom [has been reached] and it should be in a slow recovery. We probably don’t expect the recovery to be very strong.”
Whatever happens to Evergrande at this juncture, specialists say that delisting could have catastrophic downstream effects. As Dan Wang warned, it’s “goodbye forever” once delisted. Against such stark reality, Evergrande’s position looks even more precarious. It highlights that there is a critical, long-term, and environmentally sound solution desperately needed.
Economic analysts point out that these problems are larger than just Evergrande. Alicia Garcia-Herrero highlighted that “there is no real light at the end of the tunnel,” indicating a difficult landscape for recovery across various sectors. China as a whole is transitioning into a new era of development. It remains to be seen just how well the government can provide the type of support required to jumpstart the economy again.