A Hong Kong court has ordered the liquidation of Evergrande, the indebted Chinese real estate conglomerate, with the ruling issued this Monday after more than a year and a half of delays as the company struggled to reach a restructuring plan for its overseas debts. The decision shifts the case toward asset liquidation and creditor recovery channels as the company faces a mounting debt load.
Local media from the South China Morning Post reported that Evergrande carries debts near 330 billion dollars. The court noted that an appeal remains possible, though the path forward will be heavily constrained by the liquidation order.
Linda Chan, the same judge who has presided over Evergrande through seven postponements and earlier rulings, will oversee a hearing at 14:30 local time (06:30 GMT) to appoint an interim judicial administrator to take charge of the company. The session marks another major milestone in a long legal process.
“The trial stretched over a year and a half,” the court observed, while Evergrande has yet to submit a concrete restructuring proposal. The judge added that it might be time for the court to bring proceedings to a close, given the extended timeline and stalled negotiations.
The South China Morning Post explains that under Hong Kong settlement regulations, provisional liquidators will assume management of the company and handle negotiations with creditors over debt restructuring and the control of assets, books, and accounting records. This marks a pivotal shift in how the firm’s obligations will be managed during the liquidation process.
Will China recognize the order?
Shortly after the news broke, Evergrande’s shares on the Hong Kong Stock Exchange tumbled, with declines surpassing 20 percent. Its electric vehicle subsidiary, also listed on the exchange, dropped by around 18 percent. The market reaction underscores the broader uncertainty surrounding the company’s future.
International coverage had noted that Evergrande’s latest negotiations with its principal creditors had stalled, and the talks had reportedly continued with support from a consortium of lenders that previously backed a liquidation petition filed in mid-2022. A separate suit filed by a domestic investor sought approximately 110 million dollars in relation to a share buyback.
In a prior year, Evergrande cited Deloitte analyses to claim that the liquidation scenario would yield an investor recovery rate of roughly 3.4 percent. Analysts have also debated whether a liquidation order issued in Hong Kong would be recognized by mainland Chinese authorities, where the group still holds the majority of its assets.
The market will be watching closely to see what steps buyers can take and whether any recognition will be granted by the three mainland courts established under the 2021 cross-border insolvency cooperation framework between Hong Kong and mainland China, as noted by legal experts cited in Morning Post coverage. The actual enforcement of onshore assets could depend on the recognition framework and future judicial decisions.
Judicial administrators would typically have limited enforcement authority over onshore assets unless they secure recognition from mainland authorities. Experts pointed out that cross-border cooperation remains a critical factor in determining how much influence provisional liquidators can exercise over Evergrande’s onshore operations.
Long-term crisis
Evergrande defaulted more than two years ago amid a liquidity crunch after Beijing tightened controls on highly leveraged real estate developers. The once-dominant real estate developer has since been working to reduce liabilities while seeking a plan to restructure its debt. Offshore debt reportedly totals around 20 billion dollars, and several attempts to vote on restructuring proposals have been delayed repeatedly. The most recent voting event occurred in September, when deteriorating sales prompted concerns about the company’s ability to issue new debt through its main Chinese subsidiary.
The group has also faced broader leadership challenges, including a period during which founder Xu Jiayin faced restrictions related to investigations. These developments have intensified concerns about the company’s capacity to complete projects and deliver homes already sold and under construction.
It is estimated that Evergrande still has more than 1,200 projects in progress across various stages. The real estate crisis has become a focal point for China’s economic policy, given the sector’s significant contribution to both GDP and household wealth. Analysts frequently cite the potential social and financial implications of further disruptions in property sales and local government land deals.
Overall, the company’s ongoing difficulties underscore the fragility of a sector that once powered rapid growth. The broader picture shows a real estate market reinvention, with banks and regulators recalibrating risk, and investors watching closely to see how the country’s financial system will adapt to persistent headwinds in the property space.