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A court orders the liquidation of the Evergrande group

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Evergrande owed approximately US$400 billion to its creditors in 2021, and the company failed to restructure its debt. (Archive photo)

Radio-Canada

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A Hong Kong court on Monday ordered the liquidation of the developer China Evergrande Group, a decision likely to cause significant shocks to the financial and securities markets ;real estate, already fragile, and hinder Beijing's efforts to revive economic growth.

The stock market listing of Evergrande was also interrupted in the wake of the verdict, as were its subsidiaries such as Evergrande NEV electric cars. Immediately after the announcement, Evergrande shares plunged more than 20% on the Hong Kong Stock Exchange.

Evergrande was once China's largest real estate developer, but has accumulated debts to show liabilities of more than US$300 billion, becoming a symbol of the second-largest economy's years-long real estate crisis

[Considering] the obvious lack of progress on the part of the company in presenting a plan viable restructuring […] I consider it appropriate for the court to render a judgment for the liquidation of the company, and this is what I order, said Judge Linda Chan.

Evergrande, which has $240 billion in assets, defaulted on its debt in 2021, causing tremors throughout China's real estate market, which has since fallen into a deep crisis.

< source srcset="https://images.radio-canada.ca/q_auto,w_700/v1/ici-info/16x9/immobiliers-residentiels-evergrande-chine-luoyang.jpg" media="(min-width: 0px) and (max-width: 1023px)">Open in full screen mode

Evergrande's financial problems have forced the group to halt the construction of several residential complexes across China since 2021. (Photo d 'archives)

The liquidation of Evergrande comes in a context of low confidence among investors and consumers.

However, it is not expected that this decision will have an immediate impact on the developer's operations, including its short-term construction projects, while&#x27 Such a process could extend over months or even years due to the many stakeholders and Evergrande subsidiaries spread across mainland China, a jurisdiction separate from Hong Kong.

Evergrande worked for almost two years on a debt restructuring plan before this project took a hit with the indictment last September from Hui Ka Yan, its billionaire founder.

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Reuters had learned from sources close to the matter that a group of Evergrande's creditors planned to support the promoter's liquidation petition.

This request was initiated in June 2022 in Hong Kong by Top Shine Global, an investor in the Fangchebao division of Evergrande, accusing it of not having respected a share buyback agreement which he held.

Last year, a creditor filed a liquidation petition in a Hong Kong court against the promoter , but proceedings dragged on as the parties attempted to negotiate a settlement.

The collapse of Evergrande, which defaulted for the first time in 2021 and was declared bankrupt in the United States, was closely followed by the Chinese authorities, because the group was a pillar of the Chinese economy. Chinese economy.

China's construction and real estate sector accounted for about a quarter of China's GDP, but Chinese President Xi Jinping has The debt accumulated by Evergrande and other real estate companies posed an unacceptable risk to China's financial system and overall economic health.

The Authorities have gradually restricted developers' access to credit since 2020, triggering a wave of payment defaults.

At the end of June 2023, Evergrande estimated its debts at $328 billion.

With information from Agence France-Presse and Reuters

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