China: Evergrande Ordered to Liquidate Amid Property Crisis

    China: Evergrande Ordered to Liquidate Amid Property Crisis
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    The Facts

    • On Monday, Hong Kong's High Court ordered Evergrande Group, China's struggling real estate giant, to liquidate its operations after it failed to reach an agreement on how to restructure its vast debt.

    • The property sector accounts for nearly 25% of China's economy and Evergrande's default in 2021 sent shockwaves through international financial markets, leaving it to owe more than $300B. Judge Linda Chan ordered the seizure and sale of the company's assets to satisfy outstanding debts after it failed to devise an acceptable debt restructuring plan.

    The Spin

    Anti-China narrative

    This is bad news for Beijing's leaders. Over the past two decades, China's real estate sector has been a major economic driver, but massive property speculation has fueled a huge real estate bubble that Beijing has been slow to resolve. Several smaller property developers have already been forced into bankruptcy, and Evergrande's liquidation order has the potential to destabilize China's entire financial system.

    Pro-China narrative

    There's still much uncertainty around Evergrande's liquidation procedure, but there has been quite a bit of media hype. The procedure will take months, if not years, but will most likely have a minor impact on the general market. The PRC's overall recovery in the real estate sector is still proceeding well, and the liquidation request is a common legal procedure in Hong Kong's legal system.

    Nerd narrative

    There is a 10% chance that China's GDP will overtake the US before Jan. 1, 2030, according to the Metaculus prediction community.

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