Linda Chan is not afraid. The Hong Kong court judge has just ordered the liquidation of the Chinese real estate giant Evergrande. “ [Considérant] the obvious lack of progress on the part of the company in presenting a viable restructuring plan. (…) I consider it appropriate for the court to make a judgment to wind up the company, and that is what I order”, she declared on January 29, scrapping one of China’s leading companies. Will this decision put an end to two years of a financial collapse which gave the signal for the fall of one of the leading economic sectors of the Middle Kingdom?
It is not yet certain, because Hong Kong is far from Beijing. But it is at least a crucial step. Evergrande began its adventure in 1997 by purchasing at auction the land of a former insecticide factory on the edge of one of Canton’s main avenues. His project, “Jinbi Garden”, existed only on paper, but within two hours all the apartments were sold. At the time, suitors lined up day and night for the chance to secure the promise of housing.
At the height of its glory, in 2018, Evergrande was designated as the most powerful real estate group in the country. His boss, Xu Jiayin, had gone from his village grocery store to one of the richest men in the country and its most famous football club. He had also climbed into the Chinese Communist Party apparatus, which did not prevent him from owning a villa worth more than 220 million dollars (203 billion euros) in London. The group is even launching into automobile manufacturing, tourism, health, cinema, etc.
Card castle
But when the government, worried about real estate speculation, decided to restrict the granting of credit by banks, all it took was a health crisis for the house of cards to collapse. In 2021, the market fell by 30% and Evergrande declared itself insolvent for the first time. Xu Jiayin himself is suspected of fraud. In the process, other giants bit the dust.
Linda Chan’s injunction, which intends to appoint liquidators responsible for selling assets in mainland China, will be a test of the independence and power of the justice system in Hong Kong, once sovereign. Local courts, where the subsidiaries are located, will probably try to reverse the process. But it will also be a signal for the financial center of Hong Kong, once dominant and now deserted by foreign investors. The Evergrande earthquake continues to cause tremors.