Not forevergrande… A Hong Kong court ordered Evergrande to liquidate, two years after the company defaulted on its $300B debt. Evergrande was once the world’s most valuable real-estate company and China’s top developer. But attempts to restructure the debt-drowned giant have failed. Now Evergrande’s fate rests on whether mainland China recognizes the Hong Kong court’s authority (a big if). Liquidation would be a headache because Evergrande’s property development includes 1.3K+ projects in hundreds of cities.
Scope: Evergrande’s assets reach beyond real estate and China. It owns an EV biz, and its lenders have included HSBC, BlackRock, and UBS.
Zoom out: China is the second-largest economy, and real estate makes up as much as 30% of its GDP. But the sector’s crumbling, exacerbating the country’s financial woes. FYI: property accounts for 70% of China’s household wealth.
Flyin’ more than one red flag… Experts say China’s real-estate crisis has yet to hit bottom. Home sales and prices are down as developers start fewer projects and folks avoid mortgages. Meantime, foreign investors are ditching assets in China and Hong Kong as geopolitical tensions rise (think: Chinese spy balloons in American airspace, US curbs on China’s chip industry). China’s GDP and retail sales missed growth expectations last quarter — a slowdown that’s rippled through global markets.
Policy soup: In the past two weeks, China’s gov’t has tried to shore up its economy and markets by merging hundreds of rural banks, slashing reserve requirements, and limiting short-selling.
It’s hard to turn an economy off and back on again… Over three years, China’s strict zero-Covid lockdowns confined citizens indoors for months at a time. And when the country lifted restrictions in late 2022, the economy failed to bounce back as cautious consumers kept their purse strings tight. China may need gov’t stimulus to get its gears turning again: it rolled out new property-relief measures (like loans) that could soften the impact of Evergrande’s fall.