Chinese property giant Evergrande has been officially delisted from the Hong Kong Stock Exchange, marking a significant downturn for what was once the largest real estate developer in China. With a peak market valuation exceeding $50 billion, the firm has now succumbed to the staggering debts that fueled its rapid expansion. Experts characterize the delisting as a definitive end, indicating a finality that leaves little room for recovery, as noted by Dan Wang from the Eurasia Group.
Evergrande, now synonymous with economic turmoil, was a beacon of China's real estate success just a few years ago. Founded by Hui Ka Yan, who once ascended from humble origins to being one of Asia's richest individuals, the company thrived until recent circumstances caused its disintegration. Hui's net worth plummeted from an estimated $45 billion in 2017 to less than a billion today, following legal repercussions for financial improprieties totaling $78 billion.
At its peak, the company was developing over 1,300 projects in 280 cities, alongside owning major ventures, including an electric vehicle manufacturer and the famed Guangzhou FC, which has since struggled financially. With debts reaching approximately $300 billion, Evergrande's financial strategy was dismantled by new regulations introduced by Beijing in 2020 to limit developers' borrowing. These changes forced the company to sell properties at discounted rates in a desperate attempt to generate revenue.
As the company defaulted on overseas loans and underwent lengthy legal battles, the Hong Kong High Court ordered its liquidation in January 2024. The delisting had been a looming possibility following this court ruling, which resulted in a catastrophic loss of over 99% of its stock value. Liquidators have identified Evergrande's debts at $45 billion, with only $255 million of assets sold, indicating an uphill battle in the bankruptcy process.
China's real estate slump, exacerbated by Evergrande's plight, continues to hinder consumer spending and overall economic growth, which some experts estimate has slowed to around 5%. The sector's significance, accounting for roughly one-third of China's economy, and its connections to local government's revenue have driven the urgent need for remedial efforts from Beijing. Initiatives aimed at rejuvenating the housing market and restoring consumer confidence are underway, but analysts warn that the path to recovery will be gradual, possibly taking years.
Although several other real estate developers face similar fates—as exemplified by the recent winding-up order against China South City Holdings—the Chinese government appears hesitant to intervene directly to bail out struggling firms. This could lead to more collapses in the sector, according to analysts.
As Evergrande and its ramifications spiral further into crisis, the government’s focus seems to be shifting toward fostering high-tech industries, leaving the once-prosperous property market in a precarious situation with no imminent resolution in sight.
