Chinese property developer Evergrande was delisted from the Hong Kong stock market after more than 15 years of trading, signaling a significant moment for a company that was once the largest in China’s real estate sector, valued at over $50 billion. This outcome is considered by experts to be the inevitable result of the company’s protracted financial struggles, following years of accumulating debts amounting to $300 billion.
Evergrande’s founder, Hui Ka Yan, enjoyed considerable wealth, ranking among Asia’s richest individuals in 2017. However, his fortune has plummeted to less than a billion dollars, particularly after a $6.5 million fine and a lifetime ban from China’s capital markets in March 2024 for overstating revenues by $78 billion. The company had amassed around 1,300 development projects across 280 cities in China before its financial difficulties escalated.
Changes in government regulations in 2020 restricted the borrowing capacities of large developers, prompting Evergrande to offer steep discounts on its properties to maintain cash flow. The company eventually defaulted on loans, leading to a court-ordered wind-up in January 2024 after failing to devise a feasible plan to manage its overseas liabilities. As of now, Evergrande’s outstanding debts are reported at $45 billion, with liquidators finding minimal asset recovery.
The collapse of Evergrande continues to affect China’s economy, especially the real estate sector, which has historically contributed more than a third of the nation’s GDP. This downturn has contributed to increased unemployment, significant pay reductions, and diminished consumer confidence as household savings tied to property investments diminish in value.
Despite government initiatives aimed at reviving the housing market, analysts remain skeptical regarding a swift recovery, suggesting the property sector may struggle to regain footing in the coming years. The potential impact of additional developer collapses looms as other firms continue to face significant challenges, indicating that the crisis in China’s real estate market is far from resolved.
Source: https://www.bbc.com/news/articles/c14g7r44566o?at_medium=RSS&at_campaign=rss