Chinese property sector crisis (2020–present)
The company unsuccessfully attempted to sell assets to generate money, missed several debt payments, was downgraded by international ratings agencies and finally defaulted on an offshore bond at the beginning of December 2021.
In 2020, Chinese Communist Party (CCP) general secretary Xi Jinping's government started to tighten the real estate market based on the principle that "houses are for living, not for speculation.
[4] In the years preceding the 2021 crisis, Evergrande had pursued an aggressive expansion, including ventures in electric vehicles, theme parks, energy, and many other sectors.
[1] Referred to as a type of supply chain finance, investors would invest money in shell companies they falsely believed existed to supplement working capital.
[1] In 2021, other central and local government regulations, including mortgage lending limits, rent caps in big cities, and land auction cancellations, caused a slowdown in the property sector, as authorities attempted to control rising house prices.
[21] On 5 August, S&P Global Ratings downgraded Evergrande and its subsidiaries from B− to CCC, two steps on its scale, qualifying it as having extremely speculative credit worthiness.
[16] On 22 September 2021, the governments in Zhuhai and Nanshan District, Shenzhen took control of sales revenue for Evergrande's properties in a state-controlled custodial account to protect home-buyers and continue construction of the company's developments.
[26] In October 2021, The Wall Street Journal reported that the central government was planning to implement a nationwide property tax, to tackle real estate speculation.
[27][28] On 23 October, a five-year trial of the proposed tax was announced for select regions with high real estate prices, most likely Shenzhen, Hangzhou and Hainan.
[33] On 4 October 2021, the Cailian Press reported that rival Hopson Development was set to buy a 51% stake in the Evergrande Property Services subsidiary for around US$5 billion.
A letter, which the developer claimed was merely a draft, surfaced online arguing that recent regulations in Shaoxing intended to control property prices had left a local project unable to break even.
[43] On 20 October 2021, the National Bureau of Statistics of China published data indicating that home prices had fallen month-on-month for the first time since April 2015, dropping in more than half of the cities surveyed.
[44] In addition, the Chinese shadow banks, such as Sichuan Trust, have been greatly affected by the property sector crisis due to over lending and a crackdown on regulations.
[52] On 10 December 2021, a third party forcibly sold about 3.4% of Chairman Hui Ka Yan's personal holding of Evergrande stock to enforce a "security interest" (the shares had been pledged).
On 2 September 2022, a Hong Kong High Court judge rescheduled to 7 November 2022 legal proceedings to wind up China Evergrande Group, in order to give the company time to formulate a restructuring plan.
[78] Hui Ka Yan, the chairman of the board and Communist Party secretary of the Evergrande Group, was put under "mandatory measures" (a kind of detention[79] by the authorities) for suspected illegal activities on 28 September 2023.
[80] The Wall Street Journal reported that he was suspected of transferring assets offshore while it was still unclear whether the indebted property developer would be able to complete all its unfinished projects.
[82][83] On 4 December 2023, a Hong Kong court granted Evergrande Group another reprieve by adjourning a hearing until 29 January 2024, thereby allowing the company more time to restructure its debts.
[84] On 29 October 2023, at the previous adjournment, Hong Kong High Court Justice Linda Chan had originally said that the December hearing would be the last before a decision was made whether to liquidate Evergrande in the absence of a "concrete" restructuring plan.
[85] In August 2023, Country Garden Holdings warned of a large net loss for the first six months of 2023 due to impairment on property projects and declining profit margins.
[70] By the end of August 2023, Yang Huiyan, Country Garden's largest shareholder and China's richest woman two years previously, had seen her personal wealth decline by 84%, around US$28.6 billion.
[73] On 30 August, Country Garden warned it was on the "brink" of default in a filing to the Hong Kong Stock Exchange, according to The Washington Post, as it had "failed to grasp and react to the risks of the ongoing real estate slump, most notably in smaller cities that are home to most of its developments.
[92] In October, South China Morning Post called this steep drop "a crisis of confidence" that had deprived Country Garden of a "crucial source of cash flow".
[96] According to South China Morning Post this statement set off "alarm bells" in a trust sector that had invested a large portion of investors’ money in real estate projects.
This memorandum of understanding states that cross-border enforcement can be refused if legal proceedings are initiated in Hong Kong before a mainland Chinese court hears the case or the defendant is not given a reasonable opportunity to mount a defence.
[102] Ever Credit, a wholly owned unit of Hong Kong-based Kingboard Holdings, filed a winding-up petition against Country Garden at the end of February because a loan worth about US$204 million had not been repaid.
[104] At the beginning of March, Country Garden missed a payment of 96 million yuan due to Chinese onshore bondholders; the note had a 30-day grace period, however.
[105] Despite efforts by Chinese authorities to resolve a liquidity crisis in the property sector, China Vanke came under pressure due to challenges in handling its finances.
By mid-February 2023, over 30 cities had reduced mortgage rates to their lowest in over a decade, with local governments offering purchase subsidies and relaxed limits.
In response, China's minister of housing and urban-rural development Ni Hong announced that the country will expand its "whitelist" of real estate projects and increase bank lending to 4 trillion yuan by year-end.
