Evergrande Delisted from Hong Kong Stock Exchange: Another Step in China’s Troubled Property Market Crisis
The Hong Kong Stock Exchange delisted shares of Chinese real estate giant Evergrande on Monday, marking a significant step in the company’s retreat from the market. This move comes amidst ongoing efforts to settle debts that surpassed $340 billion for the once second-largest developer in China.
Evergrande encountered financial difficulties following regulatory crackdowns on excessive borrowing by developers several years ago in China. These measures led to the default of numerous property companies, resulting in a prolonged downturn in the property market that continues to impact the world’s second-largest economy.
As of Monday morning, Evergrande’s shares were delisted after being suspended for 18 consecutive months due to trading suspensions. The last trade occurred on January 29, 2024, following a Hong Kong court order for liquidation due to the company’s failure to provide a viable debt restructuring plan.
In 2020, Chinese authorities imposed “three red lines” controls that barred heavily indebted developers like Evergrande from taking on additional debt to pay off maturing bonds and loans. Fears of an Evergrande default in 2021 caused ripples throughout global markets but eased after the Chinese central bank assured markets that the issues were contained and credit markets would remain functional.
Home buyers in China typically pay for apartments before construction, leading to suspension of projects when developers such as Evergrande encountered financial difficulties. This slowdown in home purchases and construction had far-reaching effects on the demand for construction materials, appliances, and even vehicles at a time when China was also grappling with disruptions caused by the COVID-19 pandemic.
China’s housing sector has shown some recovery, but home prices and investment have continued to decline. Before the crackdown on borrowing, real estate accounted for approximately 20% of China’s economy. Including related purchases such as construction materials, furniture, and steel, this share rose to around one-third of the economy.
Chinese leaders have attempted to alleviate the situation by encouraging developers to complete ongoing projects and deliver apartments that have already been paid for. They’ve also supported local governments in purchasing excess apartments for affordable housing purposes and relaxed down payment and mortgage requirements.
In major cities, restrictions on investment property purchases have been lifted, a move analysts describe as “surprising” due to its early implementation. However, they expect sales and home prices to continue falling in August.
Founded by entrepreneur Hui Ka Yan (also known as Xu Jiayin) in 1996, Evergrande is headquartered in Shenzhen, near Hong Kong. Its shares were listed on the Hong Kong Stock Exchange in 2009. Despite filing for Chapter 15 bankruptcy protection in New York City in 2023, the case was later withdrawn. As of July 31, liquidators had received debt claims totaling $45 billion, significantly higher than the disclosed liabilities of $27.5 billion in December 2022. The liquidators have also taken control of more than 100 companies within the group with collective assets valued at $3.5 billion as of January 29, 2024. So far, about $255 million worth of assets have been sold.