The Chinese real estate developer Evergrande, which triggered a real estate crisis in China, will have its listing canceled on the 25th. Following a court liquidation order, creditors have begun claiming debts, and shareholders face the risk of total loss. In this context, major Chinese real estate developers similar to Evergrande are sequentially receiving liquidation orders from the courts, following in Evergrande's footsteps.
According to an announcement made on the 12th, the Hong Kong Stock Exchange's listing committee decided to cancel Evergrande's listing status in accordance with listing rules. Evergrande's listing status will officially be canceled from 9 a.m. on the 25th. Evergrande stated that it will not request a review of the listing cancellation decision from the committee.
According to the Chinese economic media Caixin, the exchange previously announced the suspension of Evergrande's stock trading on January 29, 2024, and conveyed the transaction resumption conditions, including ▲ withdrawal or lifting of the liquidation order, dismissal of the liquidator, ▲ securing the possibility of continued management through normal business operations and holding assets of significant value, and ▲ disclosure of all important information to the market so that shareholders and investors can assess the company's situation.
However, Evergrande had extremely limited liquidity and resources, and its business activities were virtually halted, and it could not find an appropriate restructuring plan. Ultimately, on the 8th, it received a letter from the exchange stating that it 'did not meet all the requirements for transaction resumption,' leading to the delisting decision. The Hong Kong stock market allows for delisting if a transaction suspension lasts for more than 18 months.
Christy Hung, an economist with Bloomberg Intelligence (BI), noted, 'Evergrande shareholders are highly likely to face the possibility of total loss,' and 'considering the massive claims of creditors who have priority over shareholders in the repayment hierarchy, shareholders are facing substantial risk of receiving nothing back.'
According to China Business News, Evergrande is China's largest private real estate developer, established in 1996 in Guangzhou, Guangdong Province, and has rapidly grown centered on the development of dwellings and commercial facilities. It recorded a market capitalization of over 70 billion Hong Kong dollars (approximately 12.35 trillion won) upon its listing on the Hong Kong Stock Exchange in 2009, boasting the largest scale among privately listed real estate firms in Hong Kong at that time.
Afterward, it expanded aggressively through methodical growth and borrowing, reaching 373.4 billion yuan (approximately 72.25 trillion won) in revenue in 2016 and total assets of 1.76 trillion yuan (approximately 338.83 trillion won) in 2017, rising to the top of the industry. Founder Xu Jiayin's wealth reached 290 billion yuan (approximately 55.94 trillion won) in the same year, ranking first on the Hurun list of billionaires, often referred to as the 'Chinese Forbes.'
However, Evergrande's growth model based on liability was severely impacted by the Chinese government's real estate regulations in 2020. Concerned about the real estate bubble, the Chinese government implemented strict regulations (the 'three red lines') in 2020 to prevent real estate developers from exceeding a certain level of debt ratio. As a result, Evergrande faced blocked bank loans and ran into a debt default situation.
From the second half of 2021, it faced payment defaults on bills, delays in sales, and non-payment of construction materials, and in December of the same year, it entered a complete cross-default state regarding its dollar bonds due to a $260 million (approximately 360.4 billion won) debt default at the time. Evergrande recorded an astronomical loss exceeding 800 billion yuan (approximately 154.25 trillion won), marking the largest deficit in Chinese corporate history, and in March 2022, Evergrande, Evergrande Property, and Evergrande Automobile simultaneously faced transaction suspensions.
On August 28 of the same year, Evergrande's transactions resumed after 17 months, but its stock price collapsed nearly 80% in just one day, falling to 'penny stock' status. Its market capitalization shrunk to 4.622 billion Hong Kong dollars (approximately 816 billion won). The overseas debt restructuring plan that had been pursued for over two years ultimately yielded no results, and the court eventually ordered corporate liquidation.
The Evergrande incident has shocked the entire Chinese real estate industry. The real estate sector, which once accounted for 25-30% of China's gross domestic product (GDP) and was a key driver of economic growth, has not emerged from stagnation for over five years. The Chinese government has introduced stimulus measures, such as easing housing purchase restrictions, to revive the real estate market, but housing prices in China continue to decline.
Companies are sequentially undergoing liquidation processes. China's major real estate developer China South City Holdings received a liquidation order from a Hong Kong court on the 11th, and another large real estate developer Country Garden is also proceeding with liquidation.