Chinese developer Evergrande to undergo forced sale amidst $333 billion of debt
A decision by Hong Kong’s High Court ordering the forced sale of embattled Mainland Chinese real estate developer Evergrande is making new ripples in China’s already struggling economy and real estate sector.
According to CNN, on Monday, the court ordered a liquidation sale of the company’s assets following a series of events and snowballing conditions in recent years — initially marked by the company’s default on its debt in 2021, which largely triggered a property crisis in the country.
Then, in June 2023, with US$333 billion (CN¥2.39 trillion) in debt, it filed for bankruptcy, which led to this week’s court proceedings in Hong Kong after creditors could not find a way to restructure the company’s debt.
Out of this total debt load, US$25 billion (CN¥177 billion) is owed to international creditors outside of China.
Shenzhen-based Evergrande has been deemed the world’s most indebted real estate developer and the “poster child” of China’s property debt crisis, which has also impacted numerous other major developers based in China.
China’s property crisis stems from many years of overbuilding to propel national economic growth and the Chinese government’s recent moves to limit real estate borrowing.
It is estimated that the number of vacant and partially built homes across China is more than enough to house the country’s entire population of 1.4 billion people, according to Reuters.
China’s economic issues due to its real estate sector challenges have also been felt in Canada, both in terms of the reduced activity from individual property investors and large development activity.
For instance, in early 2022, due to its financial challenges, China’s Aoyuan International sold its upcoming The Grove residential redevelopment project in Burnaby’s Brentwood district to Anthem Properties for C$215 million. Anthem Properties has since revised and rebranded the project as South Yards. In December 2023, Aoyuan filed for bankruptcy protection.
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