An Evergrand Commercial complex in Beijing on January 29, 2024.
Greg Baker | AFP | Getty pictures
The China Evergrand Group was rejected on Monday by the Hong Kong Stock Exchange, a shameful exit for the former high-flying developer, who, after the economic increase in Beijing after the economic increase in Beijing, symbolized the country's bust of ownership.
After his listing in 2009, Evergrande had become one of the hottest stocks of China, whereby the company's market capitalization reached 51 billion US dollars in 2017. Trading with the company's shares had been suspended since January 2024 when it received a liquidation order, whereby the market value corresponds to almost 280 million US dollars in accordance with LSEG data.
Evergrande, once China's largest developer of sales, will now remember more than $ 300 billion in debt of the most indebted developers worldwide and whose delay has derived a broader crisis from the country's economic growth.
It was one of the earliest developers who stalled after the outcome of his three-Red guideline in 2021.
Deflating property bubble
Evergrande's relaxation after its collapse developed during a lengthy real estate slump, although the analysts expect the air resistance to make it easier in the coming years.
China's apartment has extended to a fourth year, whereby prices, sales, investments and construction activities are faltered all by way.
The new real estate prices in China fell eight months at the fastest pace in June and fell by 3.2% compared to the year before the decline in real estate injuries deepened in July.
“China's real estate bubble reached its peak in 2021 and has been emptied since then,” said Andy Xie, an independent economist in Shanghai. He pointed out that the sales volume of new residential real estate in the four years is halved. Prices have also halved in the suburbs in smaller cities and large cities and fell up to 30% in central areas of the animal 1 cities, emphasized the economist.
“The adaptation is not over yet. But the economy has already absorbed most of the effects,” added Xie.
“China's real estate market correction is still a persistent headwind, although we are forecasting less stress over the next few years,” said Changchun Hua, chief economist at KKR, and estimated a lower dent of 1.5 percentage points on China's gross domestic product in 2025 compared to 2.5 percentage points in 2022.
According to HUA estimates, this influence will continue to be reduced to only 0.3 percentage points by 2027 to 2027.
At a high -ranking political meeting last week, the Chinese Prime Minister Li Qiang emphasized the need for more effective measures to combat the real estate market and to stabilize the market expectations. China's real estate and construction sector made up more than a quarter of Chinese GDP before Beijing's action against the excessive debts of the developers advanced in 2020.
On Monday, the Shanghai government announced a number of measures to increase the demand for the request, including enabling authorized families, to buy an unlimited number of houses in the outer suburbs and to request lower mortgage interests. This was followed by similar loosening measures from the Urban Government of Beijing at the beginning of this month, in which buying restrictions on houses on the outskirts were removed.
According to William Wu, China Property Analyst on Daiwa Capital Markets, the shares of Chinese developers gathered on Monday morning with optimism that Beijing will promote more incentives to support the real estate market.
“Flight to security”
Since most private developers are already excluded and carry out debt rescheduling, “we are beyond the wave of default,” said Leonard Law, Senior Credit Analyst at Lucror Analytics.
According to Christine Li, research director for the Asian-Pacific area at Global Property Consultancy Knight Frank, some colleagues from Evergranden can be exposed to similar delistling risks. Dozens of Chinese developers have been approved for debt structure plans since the beginning of this year and, according to the estimates of Li, more than 1.2 trillion yuan ($ 167 billion) deleted in liabilities.
Beijing has asked the local governments to ensure faster loans to cash weakened developers, and accordingly are considering a plan to mobilize state companies in order to take over unsold houses from needy developers in order to stabilize the sector.
Although the risk of more developer failures has decreased, consolidation in relation to state -supported developers appears inevitable, since the multi -year crisis has left the home buyers more carefully than before.
“There is now a clear flight to security in which buyers prefer state developers and have completed real estate about pre -sale,” said Cathy LU, a loan analyst at Octus, formerly known as Reorg, a financial data company specializing in debt.
Many of the great developers who will be “zombie companies” are finally included in the state machinery, said Brian McCarthy, who headed the director at Macrolens. He predicts that the state units are coming in and the completion of unfinished units will be financed.
“In the end, the state -owned developers will lead the entire industry. The political decision -makers in China will never let these bubbles address [what] We have seen in the past 15 years, “he said.
Shell of a real estate empire
In January of last year, a court in Hong Kong ordered the liquidation of the local assets of the ever -grand after his believers had submitted a petition in which Alvarez & Marsal – the company that had contributed to relaxing Lehman Brothers – to make the procedure.
So far the progress has been slow. Overseas believers have only withdrawn a fraction of the fraction owed, with most of Evergrand's assets sitting on the mainland.
Evergrande still has at least hundreds of unfinished projects across the country, and hundreds of thousands of domestic buyers are waiting for their houses and a long creditor, from companies in China who delivered materials to Evergranden, to bond owners who are withdrawing for their losses.
“For Evergrande, delivery remains home,” said Octus' Lu. Evergrande said that 1.2 million houses have delivered in the past four years, with more than 95% of the units sold, according to state media reports, citing a representative of the company.
However, the creditors are still exposed to unsafe repayment prospects. While his offshore company has been working in the liquidation process since last year, the massive onshore units of Evergranden are also insolvent and offer little restructuring value, added LU.
The Hong Kong liquidators said in a submission at the beginning of this month that the debt burden of Evergranden was far greater than estimated and every “holistic” restructuring is out of reach. Evergrand's debt heap is 45 billion US dollars, which is significantly higher than the liabilities opened in Evergrandes in 2022, according to the liquidators.
Despite the liquidation efforts in overseas, bond loan and types are probably largely wiped out, said McCarthy from Macrolens. “For overseas investors who invest through Hong Kong in China, you have a limited recourse to onshore assets when things get bad.”