Chinese property giant Evergrande, which was once at the peak of China’s real estate boom, is set to be delisted from the Hong Kong stock exchange on Monday after trading for over 15 years. This marks a significant moment for a company that commanded a valuation exceeding $50 billion (£37.1 billion) just a few years ago, before a shocking decline fueled by mounting debts.
Dan Wang, director of Eurasia Group's China division, emphasized the finality of the delisting, stating, “Once delisted, there is no coming back.” Evergrande has become synonymous with a larger crisis that has plagued the Chinese economy for years.
Not long ago, Evergrande, founded by Hui Ka Yan, stood as a symbol of China's rapid economic ascent, with Ka Yan rising from modest beginnings to become one of the richest individuals in Asia by 2017. However, his estimated fortune has dramatically shrunk from $45 billion to under $1 billion, particularly after facing a $6.5 million fine and a lifetime ban from China’s capital markets for inflating company revenues by $78 billion.
With approximately 1,300 ongoing projects across 280 Chinese cities, Evergrande also extended its reach into the electric vehicle market and ran the successful Guangzhou FC football club, which has also struggled under financial strain. At the center of its downfall is a staggering $300 billion in debt, earning it the title of the world’s most indebted property developer.
Beijing’s decision to enforce stricter borrowing limits in 2020 is recognized as a turning point, pushing Evergrande to sell properties at steep discounts in a desperate attempt to generate cash flow. The company defaulted on overseas debts, triggering prolonged legal battles that culminated in a winding-up order from a Hong Kong court in January 2024. By that point, Evergrande's market value had plummeted by over 99%.
Liquidation hearings are expected to focus on recovering funds for creditors. As current estimates put Evergrande’s debts at $45 billion, only $255 million in asset sales have been realized so far. Experts fear a complete restructuring may be beyond reach, illustrating a troubling financial landscape.
The ramifications of Evergrande's collapse reverberate throughout China, particularly as the property sector accounts for roughly one-third of the nation's economy. The ongoing crisis has led to mass layoffs and significant pay reductions within the industry, further straining household finances as property prices drop by about 30%.
Local governments, heavily reliant on land sales and property taxes, are also feeling the impact as consumer spending declines. Beijing has introduced measures to stimulate the housing market and broader economy, though growth has slowed, now averaging around 5%.
Despite efforts, the outlook for the property market remains bleak, with expert predictions suggesting a slow recovery at best. Other developers, including Country Garden, face similar pressures, further indicating that the challenges within the sector are not yet over.
Beijing's approach has largely steered clear of direct bailouts to troubled developers, conveying a commitment to avoid encouraging risky behavior within the industry. As the focus shifts towards high-tech industries and other sectors, the once-booming property market seems left to fend for itself, leaving the future of Chinese real estate hanging in the balance.
