China Evergrande ordered to liquidate, owing $300 bln

[Calista241]

Source: Reuters

HONG KONG, Jan 29 (Reuters) - A Hong Kong court on Monday ordered the liquidation of property giant China Evergrande Group (3333.HK), opens new tab, a move likely to send ripples through China's crumbling financial markets as policymakers scramble to contain a deepening crisis.

The decision to liquidate the world's most indebted developer with more than $300 billion of total liabilities was made by Hong Kong Justice Linda Chan, who noted Evergrande had been unable to offer a concrete restructuring plan despite months of delays.

"It is time for the court to say enough is enough," she said.

Chan will deliver her reasons for granting the liquidation at 2:30 pm (0630 GMT). It is expected a provisional liquidator will be appointed to oversee Evergrande ahead of a permanent appointment.

Evergrande, which has $240 billion of assets, sent a struggling property sector into a tailspin when it defaulted on its debt in 2021 and the liquidation ruling will likely further jolt already fragile Chinese capital and property markets.

Read more: https://www.reuters.com/business/embattled-china-evergrande-back-court-liquidation-hearing-2024-01-28/

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This is the first step in what could easily be a global economic catastrophe.

[msongs]

1. entire cities full of empty condos/apts owned by speculators. what could go wrong

[True Dough]

2. The way China handled its real estate sector seems

miscalculated on a scale that, dare I say it, is ever grand!

[Irish_Dem]

9. The real estate sector is just one problem.

Chinese municipalities are deeply in debt to the tune of $12 Trillion. Yes Trillion.

They kept borrowing money to build useless infrastructure projects.
The Chinese government thought this was the best investment, but the projects don't bring in revenue.

Xi has also been loaning huge sums of money to third world countries to seduce them into
allegiance called Chinese debt traps.

Now these countries cannot pay back the debt due to the global recession caused by Putin's invasion of Ukraine.
So China is on the hook for $trillions there as well.

Now Xi's latest brainstorm is to subsidize the Chinese stock market which is crashing.
At some point you have to pay the piper, so Xi is clueless, totally clueless, about how to run an economy.

Chinese experts are so disturbed about what is happening they are speaking out publicly at great risk
to themselves personally.

[Emrys]

11. I worked as a subcontractor on a prospectus for Evergrande a few years ago

It set out, in a highly glossy and idealized format, literally grand designs for an urban development for which they were looking for backers.

It looked amazing, and had a high degree of regard for environmental concerns, with the sorts of a whole range of design features it would be great to see incorporated into urban planning anywhere.

My main misgiving was when you added into the equation the people who would live there.

It might have suited the Chinese culture, it would certainly demand a high degree of conformity from residents despite a lot of thought and effort to make it liveable and provide many amenities, as evidenced by the flashy illustrations showing happy families in idyllic surroundings etc., but its scale was daunting (especially for me as I'm not a city person anyway), and unless a hell of a lot of resources were devoted to upkeep, I could see it turning into a nightmareish, dirty concrete jungle as so many of our brutalist townscapes that were thrown up in the west in the 1960s have done over the years.

The other big question was where on earth all the money was going to come from. It looks like they didn't solve that one.

[speak easy]

3. 'a global economic catastrophe.' just in time for November?

It is in no one's interest that China falls into a depression.

[PortTack]

5. That's exactly right...Evergrande going belly up is a BFD!!

[Irish_Dem]

8. China's economy is in free fall right now.

No one knows when it will hit bottom but that is where it is headed.

[speak easy]

12. Economists surveyed by Bloomberg this year expect Chinese growth in 2024 (4.5%)

https://www.bloomberg.com/news/articles/2024-01-29/china-s-deflation-pressures-seen-persisting-through-mid-2024

There is no consensus that China is in 'free-fall'. Evergrande defaulted on it's debt in December 2021. Its demise is not unexpected. This is not a Lehmann event IMO.

[Irish_Dem]

13. I listen to China Update almost every day. Chinese economists are saying the opposite.

Anyone who is optimistic about the Chinese economy is quite misguided.
Bloomberg is being very foolish. Anyone who is taking their investment advice about
China needs to think twice and be very cautious.

I highly recommend you listen to China Update here on the DU video section.
It will open your eyes to the reality.

The housing crisis is only one of the many Chinese financial problems.
The Chinese government is basically clueless about how to run a capitalistic economy
within a a socialist government framework.

China has $12 TRILLION in municipal debt spent on useless infrastructure projects which bring in no revenue.
China is holding $Trillions in their debt trap schemes in third world countries which cannot pay it back.

The Chinese stock market is now crashing and Xi's brilliant idea is to subsidize the stock market.
Xi has no concept that you must pay the piper one day.

American companies are trying to leave China. It is a bad bet to stay for a number of reasons.

I could go on and on. But you get the idea I hope.

[speak easy]

14. I loathe President Xi

and look forward to American companies getting out of China ASAP, but, with the degree of central control the CCP has over that economy, I don't see a depression is on the cards this year, nor do I see it as desirable in an election year when President Biden has a good news story to tell.

[Irish_Dem]

15. Joe Biden does not have control over the Chinese economy.

Whether we think it is "desirable" for his campaign or not, denying reality does not make things go away.
The world's second largest economy is in trouble. Biden knows that.

The point I am making is that the Chinese government has lost control of the economy and they
keep making it worse they more they try to control it. All of their attempts to control it
are failing.

I suggest you go and listen to back episodes of China Daily here on DU.
It will open your eyes a great deal.

[Silent Type]

4. Judge is putting them on notice that they need to come up with a viable plan quickly.

[Irish_Dem]

10. They have had years to come up with a plan.

There is no good plan.

[NBachers]

6. The article keeps mentioning offshore bondholders. I wonder how far offshore, and who has their fingers in this pie.

[muriel_volestrangler]

7. However, Hong Kong v. mainland Chinese jurisdiction may be a factor - text updated at source

The decision sets the stage for what is expected to be a drawn-out and complicated process with potential political considerations as investors watch whether the Chinese courts will recognise Hong Kong's ruling, given the many authorities involved. Offshore investors will be focused on how Chinese authorities treat foreign creditors when a company fails.
...
"It is not an end but the beginning of the prolonged process of liquidation, which will make Evergrande's daily operations even harder," said Gary Ng, senior economist at Natixis. "As most of Evergrande's assets are in mainland China, there are uncertainties about how the creditors can seize the assets and the repayment rank of offshore bondholders, and situation can be even worse for shareholders."