LUCAS DE LA CAL Shanghai

Shanghai

Updated Monday, January 29, 2024-07:23

  • China Chinese real estate giant Evergrande files for bankruptcy in the United States

  • China The father of the indebted real estate giant Evergrande is under "police surveillance"

Patience has run out with the most indebted real estate developer in the world.

Evergrande Group

, once the cornerstone of unbridled developmentalism in China, has been unable to reach an agreement to restructure more than $

300 billion

in liabilities. Many of its extraterritorial creditors had been asking the courts for more than a year to take a tough line against the Chinese giant. This Monday, a

Hong Kong

judge ordered the liquidation of Evergrande.

"The hearing has lasted a year and a half, and the company has still not been able to present a concrete restructuring proposal to restructure its $328 billion in liabilities," argued Judge Linda Chan. As soon as the ruling was known, Evergrande shares

plummeted on the Hong Kong stock market by more than 20%

. One of its subsidiaries, focused on the manufacturing of electric vehicles, also fell 18%.

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The journey to hell of the founder of Evergrande (and other disgraced Chinese titans)

  • Editor: LUCAS DE LA CAL (Correspondent)Shanghai

The journey to hell of the founder of Evergrande (and other disgraced Chinese titans)

The collapse of Evergrande, which became the second largest real estate company in China, began at the end of 2021 when it defaulted on its debt obligations with its creditors. That shook a sector that has enormous weight in the Asian superpower, to the point of representing up to 30% of the country's GDP.

The lawsuit against Evergrande was initiated in June 2022 by investment holding company

Top Shine Global

in an attempt to recover more than $100 million from a failed investment. Following the court order, the provisional liquidators appointed in another hearing in Hong Kong will have to take charge of the management of the real estate company, its assets and records, including the negotiation of the failed debt restructuring.

However, as an analysis by the Hong Kong newspaper

South China Morning Post

recalls , the court order faces many interjurisdictional challenges since most of the assets of Evergrande, which is based in the city of

Guangzhou

, are located in China, including the most of 1,200 projects that the company currently has in development. In a statement, Evergrande executive vice president Xiao En assured that the developer will guarantee that the homes currently under construction are delivered to buyers.

Since 1996

Evergrande Group opened its doors in 1996 with a first project of 323 apartments that were sold in 12 hours. Then came massive development, satisfying the demand for housing in a China that did not stop growing. The company, opened under the umbrella of leader

Deng Xiaoping

's successful reform and opening-up experiment , became a real estate colossus that was first listed in Hong Kong in 2009.

Behind Evergrande was

Hui Ka Yan

(64 years old), a businessman well connected to the power of Beijing as a member of the Chinese People's Political Consultative Conference, the largest political advisory body in the Asian country. The company had

200,000 employees

- plus another 3.8 million jobs that it generated indirectly each year - and 1,300 projects in more than 280 cities in China.

Hui managed to aggressively expand his empire thanks to loans to support massive land purchases and lower-margin home sales, achieving a record annual sales figure of $95.8 billion in 2020. A year later, the company collapsed after being unable to make interest payments on around $1.2 billion in international loans.


Last September, news broke that the founder and president of the indebted developer was under house arrest.

"Residential surveillance

," the Chinese authorities call it. Shortly after the company announced that it was suspending the trading of its shares in Hong Kong again - they resumed at the end of August after a year of paralysis - Evergrande explained that Hui was under investigation because he was

"suspected of crimes"

, without specify nothing more.

Evergrande has been the great symbol of a time in which developers and local governments were eager to request large loans from banks to boost land sales and build properties.

All of this led to excessive indebtedness that the central government tried to stop with a series of regulations that a couple of years ago pushed large companies that had great difficulty meeting their debt obligations into the abyss. After the Evergrande crisis, problems arose for other developers, such as the largest private developer,

Country Garden

, which also has a liability of just under 200,000 million.