It marks another blow to the troubled firm which in 2021 was declared to be in default after missing a crucial repayment deadline, triggering China’s current real estate market crisis. The decision is likely to send further ripples through China’s financial markets at a time when authorities are trying to curb a stock market sell-off. China’s property sector remains fragile as investors wait to see what approach Beijing will take to the court’s move. A court in Hong Kong has ordered the liquidation of debt-laden Chinese property giant Evergrande. PwC’s Chinese auditing arm has been suspended from the country for six months over its work on the collapsed Chinese property giant Evergrande. Evergrande first defaulted on its financial obligations in 2021, just over a year after Beijing clamped down on lending to property developers to cool a property bubble.
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However, Beijing may be reluctant to see work halt on property developments in China, where many ordinary would-be homeowners are waiting for apartments they have already paid for.
Evergrande expanded aggressively to become one of China’s biggest companies by borrowing more than $300bn. The broader Evergrande Group encompasses far more than just real estate development. The boss of the World Trade Organization warns the global economy is facing numerous challenges. But experts are still unsure whether that agreement will have an impact on Evergrande’s liquidation order. The unwinding is likely to take some time and construction is expected to continue in the meantime.
- Evergrande expanded aggressively to become one of China’s biggest companies by borrowing more than $300bn.
- A court in Hong Kong has ordered the liquidation of debt-laden Chinese property giant Evergrande.
- Most of Evergrande’s assets – 90% according to Judge Chan’s ruling – are in mainland China and despite the “one country, two systems” slogan, there are thorny jurisdictional issues.
- The case that resulted in Monday’s ruling was brought in June 2022 by Hong Kong-based Top Shine Global, which said that Evergrande had not honoured an agreement to buy back shares.
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Big investors have turned to the courts, including in Hong Kong, where Evergrande’s shares are listed. The case that resulted in Monday’s ruling was brought in June 2022 by Hong Kong-based Top Shine Global, which said that Evergrande had not honoured an agreement to buy back shares. The slowburn crisis at Evergrande has sent shockwaves through the investment community, with its potential impact likened to the collapse of Lehman Brothers at the start of the financial crisis. The property giant, which has been in hot water with its creditors for the last two years, filed a request for another three months’ leeway at 4pm on Friday.
Financial data per annual reports
The new measures led Evergrande to offer its properties at major discounts to ensure money was coming in to keep the business afloat. According to the company’s website, Evergrande Real Estate currently owns more than 1,300 projects in more than 280 cities across China. Last September, its chairman was placed under police surveillance following earlier reports that other current and former executives at Chinese property giant Evergrande had also been detained. She presides over not just Evergrande’s case, but also other defaulted developers such as Sunac China, Jiayuan and Kaisa. However, even if Judge Chan’s orders are not carried out in China, the decision sends a strong message and gives a clue on what other developers and creditors may face. Ordinary Chinese property buyers have limited options to demand compensation, but many have taken to social media to express their frustration about developers like Evergrande.
PepsiCo and PwC are among the businesses to confirm they will move into One Station Hill in Reading. “It is not representative of what we stand for as a network and there is no room for this at PwC,” the firm’s global chair Mohamed Kande said. In response to the penalties, PwC said it had taken “a number of accountability and remedial actions”, including the sacking of six partners and the launch of a process to fine responsible team leaders. PwC China admitted the work had fallen “unacceptably below the standards” expected within the firm and apologised for the impact on its clients.
The Big Four accountancy firm is also being fined more than $62m (£47m) after Chinese authorities said it had helped cover up fraud at Evergrande. Evergrande CEO Shawn Siu told Chinese news outlet 21Jingji that the company feels “utmost regret” at the liquidation order. Mr Roberts, who spent more than two decades in China as a journalist, said “the old Evergrande no longer exists” and while the authorities may keep it afloat, “it will be as a radically diminished company.” “To be honest, Evergrande has already collapsed,” says Mr Chan, adding that he believes “it is on the brink of a forced liquidation”.
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Regulators need to restructure Evergrande and other struggling property developers, but it will be a complex and difficult process, said David Goodman, director of the China Studies Center at the University of Sydney. As a former British colony, Hong Kong operates under a legal system that is separate, though increasingly influenced by, communist-ruled China’s. In some cases, mainland courts have recognized bankruptcy rulings in Hong Kong but analysts say Evergrande’s is something of a test case. Its chairman, Hui Ka Yan, who is also known as Xu Jiayin, was detained by authorities for suspected “illegal crimes” in late September, further complicating the company’s efforts to recover.
That could include seizing and selling off assets, so that the proceeds can be used to repay outstanding debts. Trading in the company’s shares was suspended in Hong Kong, external after the ruling. “We will pursue a structured approach to preserve and return value to the creditors and other stakeholders,” Wong said. In remarks published online, she lambasted the company for putting out only “general ideas” about what it may or may not be able to put forward as a restructuring proposal. The interests of creditors would be better protected if Evergrande is wound up by the court, she said.
Evergrande shares fell by more than 20% in Hong Kong after the announcement, before umarkets review trading was suspended. Judge Linda Chan said “enough is enough”, after the troubled developer repeatedly failed to come up with a plan to restructure its debts. In April 2022, Reuters reported that construction had been started again at many projects[16] and that the company still had liabilities of US$300 billion.
China Evergrande Group is among dozens of Chinese developers that have collapsed since 2020 under official pressure to rein in surging debt the ruling Communist Party views as a threat to China’s slowing economic growth. This may also unnerve foreign investors, who could see China as a less attractive place to put their money. Firstly, many people bought property from Evergrande even before building work began. They have paid deposits and could potentially lose that money if it goes bust. In 2020, Beijing lmfx review brought in new rules to control the amount owed by big real estate developers.
The crisis at the world’s most indebted property developer Evergrande has deepened as a court in Hong Kong ordered the company to be wound up. Evergrande has come to symbolise the rollercoaster ride of China’s property boom and bust, borrowing heavily to finance the building of forests of tower blocks aimed at housing the millions of migrants moving from rural areas to cities. The liquidators will look at Evergrande’s overall financial position and identify potential restructuring strategies.