A Hong Kong court yesterday ordered the liquidation of property giant China Evergrande Group (恆大集團), but the firm said it would continue to operate in a case that has become a symbol of the nation’s deepening economic woes.
Once China’s biggest real-estate firm, its astronomical debt of more than US$300 billion became emblematic of a years-long crisis in the country’s property market that has reverberated throughout the world’s second-largest economy.
The order kickstarts a long process that should see Evergrande’s offshore assets liquidated and its management replaced, after the company failed to develop a working restructuring plan.
Photo: AFP
The company’s executive director vowed the Hong Kong court’s decision would not impact its domestic operations, while analysts said the ruling would further erode foreign investor confidence in China.
Given “the obvious lack of the progress on the part of the company in putting forward a viable restructuring proposal and the insolvency of the company... I consider that it is appropriate for the court to make a winding up order against the company and I so order,” High Court judge Linda Chan (陳靜芬) said.
In her written judgement issued yesterday afternoon, Chan wrote creditors’ interests would be “better protected” if the company is wound up and independent liquidators could take over to secure assets and restructure as needed. Edward Middleton and Tiffany Wong (黃詠詩) of law firm Alvarez & Marsal Asia Ltd were appointed by Chan as liquidators.
The winding-up petition was filed in 2022 by creditor Top Shine Global Ltd, which wanted its money back after Evergrande formally defaulted in December 2021. However, analysts are skeptical whether any creditors would be repaid in full.
Chan’s judgement said that 90 percent of Evergrande’s assets are in China.
“I doubt [Evergrande’s] offshore creditors would receive substantial recovery proceeds from the liquidation order,” Creditsights Singapore LLC credit analyst Zerlina Zeng (曾竹君) told Bloomberg.
Evergrande executive director Shawn Siu (肖恩) called the decision “regrettable,” but vowed yesterday that the company’s operations in China would continue.
“The Group will still endeavor to do everything possible to safeguard the stability of its domestic business and operation,” he told a Chinese business outlet, adding that Evergrande’s Hong Kong arm was independent from its domestic subsidiary.
The company would “steadily push forward with the key work of guaranteeing the delivery of buildings, and maintain the quality of property services without being affected,” Siu added.
Shares in Evergrande plunged 20.87 percent to HK$0.16 in Hong Kong following the ruling, before the stock exchange halted trading in the morning. Trading was also halted in Evergrande’s electric vehicle subsidiary.
Last year, Evergrande chairman Xu Jiayin (許家印), known as Hui Ka Yan in Cantonese, was “subject to mandatory measures” from authorities on suspicion of “crimes.”
In yesterday’s ruling, Chan wrote that a winding-up order had the “advantage” of taking control of the company away from Xu, removing a hurdle for restructuring.
By the end of June last year, Evergrande estimated it had debts of US$328 billion.
The impact of Monday’s decision on Evergrande’s construction activities in China is “unknown,” Mizuho Bank Ltd chief Asian foreign exchange strategist Ken Cheung (張建泰) said.
However, the liquidation would likely remind investors of the sector’s ill-health and “may keep foreign investors away,” he said.
While the winding-up was “widely anticipated,” the challenge is on “whether the liquidator will succeed in obtaining recognition... from mainland courts to seize” assets, Saxo Markets chief China strategist Redmond Wong (黃永輝) said.
“Authorities will probably manage this liquidation in a way that doesn’t cause major contagion effects to other parts of the economy,” AMP Financial Services Holdings Ltd chief economist Shane Oliver said.
However, “it tells us that the property crisis is still far from being resolved, and remains an ongoing drag on the Chinese economy.”
RUN IT BACK: A succesful first project working with hyperscalers to design chips encouraged MediaTek to start a second project, aiming to hit stride in 2028 MediaTek Inc (聯發科), the world’s biggest smartphone chip supplier, yesterday said it is engaging a second hyperscaler to help design artificial intelligence (AI) accelerators used in data centers following a similar project expected to generate revenue streams soon. The first AI accelerator project is to bring in US$1 billion revenue next year and several billion US dollars more in 2027, MediaTek chief executive officer Rick Tsai (蔡力行) told a virtual investor conference yesterday. The second AI accelerator project is expected to contribute to revenue beginning in 2028, Tsai said. MediaTek yesterday raised its revenue forecast for the global AI accelerator used
TEMPORARY TRUCE: China has made concessions to ease rare earth trade controls, among others, while Washington holds fire on a 100% tariff on all Chinese goods China is effectively suspending implementation of additional export controls on rare earth metals and terminating investigations targeting US companies in the semiconductor supply chain, the White House announced. The White House on Saturday issued a fact sheet outlining some details of the trade pact agreed to earlier in the week by US President Donald Trump and Chinese President Xi Jinping (習近平) that aimed to ease tensions between the world’s two largest economies. Under the deal, China is to issue general licenses valid for exports of rare earths, gallium, germanium, antimony and graphite “for the benefit of US end users and their suppliers
Dutch chipmaker Nexperia BV’s China unit yesterday said that it had established sufficient inventories of finished goods and works-in-progress, and that its supply chain remained secure and stable after its parent halted wafer supplies. The Dutch company suspended supplies of wafers to its Chinese assembly plant a week ago, calling it “a direct consequence of the local management’s recent failure to comply with the agreed contractual payment terms,” Reuters reported on Friday last week. Its China unit called Nexperia’s suspension “unilateral” and “extremely irresponsible,” adding that the Dutch parent’s claim about contractual payment was “misleading and highly deceptive,” according to a statement
Artificial intelligence (AI) giant Nvidia Corp’s most advanced chips would be reserved for US companies and kept out of China and other countries, US President Donald Trump said. During an interview that aired on Sunday on CBS’ 60 Minutes program and in comments to reporters aboard Air Force One, Trump said only US customers should have access to the top-end Blackwell chips offered by Nvidia, the world’s most valuable company by market capitalization. “The most advanced, we will not let anybody have them other than the United States,” he told CBS, echoing remarks made earlier to reporters as he returned to Washington
RSS