These points help explain what has unfolded at the company that became China’s largest real estate developer.
1. The emergence of the crisis
The alarms sounded in mid 2021 when Evergrande defaulted on foreign debt. With offshore liabilities exceeding 300 billion dollars, the company faced hundreds of lawsuits and a climate of deep uncertainty in the sector because of the risk of a possible bankruptcy.
Evergrande, like many developers who rode the late 1990s real estate boom, relied heavily on debt and financing operations. It continued pushing developments through off plan sales. Analysts estimated that the firm had sold about 1.4 million homes ahead of construction, a factor contributing to more than 200 billion dollars in exposure when the crisis hit.
2. The three red lines
One of the central catalysts of the real estate squeeze in China was the regulatory framework known as the three red lines, introduced by Beijing in 2020. The rules limited access to financing for developers with excessive leverage, weak liquidity, or insufficient capital to service short term liabilities.
This measure intensified liquidity stress for many firms. It coincided with a broader effort to cool home prices in a market that many families could not afford to enter. President Xi Jinping has emphasized that houses should be for living, not for speculation.
3. The market does not react
The economic slowdown following the Zero Covid policy, the heavy weight of the real estate sector on GDP, and buyer distrust together dampened housing demand. Families increasingly viewed homes as a key investment tool, and the sector faced a mounting waiting game as buyers hesitated.
Regulators responded in recent months with measures intended to support the sector. They offered guarantees for the delivery of homes already paid for and rolled back some of the earlier restrictions. Yet demand remained subdued. Official figures show that commercial sales by land area fell by 24.3 percent in 2022 and by 8.5 percent in 2023.
4. No restructuring agreement
Evergrande proposed a restructuring of nearly 20 billion dollars of offshore debt but faced repeated delays in creditor votes. The latest round occurred in September when the company argued that sales were worse than anticipated and could not issue new debt through its main Chinese subsidiary.
According to a major American business daily, the last negotiation round with creditors failed and a significant group of offshore bondholders supported liquidation. The company proceeded with asset sales to raise funds after seven postponements amid negotiations.
5. Turbulence returns
The most recent period has been especially volatile for Evergrande. The company has posted losses in the tens of billions since 2021, its US bankruptcy filing paused asset protection for a year and a half, and its stock price has plunged dramatically from its late 2010s peak. The founder, Xu Jiayin, who was once China’s richest man, faced domestic scrutiny and house arrest measures tied to alleged illegal activity. Officials also moved against individuals tied to the groups electric vehicle unit and asset management subsidiary.
6. What happens now?
A Hong Kong court ordered liquidation and is expected to appoint a trustee to oversee the company’s management and assets. Analysts weigh whether mainland China will recognize this move, given that Hong Kong operates under a distinct legal system. If recognition is limited, enforcement over onshore assets could be constrained. Legal experts note that judicial administrators may have restricted powers outside the special administrative region, depending on cross border recognition rules.
Industry observers caution that the outcome will hinge on regulatory alignment, creditor support, and the ability to stabilize onshore assets as the group navigates the fallout from years of aggressive expansion and debt accumulation.