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Evergrande's Downfall: China's Top Developer Faces Hong Kong Delisting
30 Jul
Summary
- Evergrande set to be delisted from Hong Kong exchange next month
- Chinese property market in multi-year tailspin despite government efforts
- Developers face deteriorating cash flow, resistance from bondholders
China's property market, once a key growth driver for the world's second-largest economy, has been in a multi-year tailspin despite repeated government attempts to revive weak consumer demand. Evergrande, once China's top developer, is set to be delisted from the Hong Kong exchange next month after failing to provide a viable restructuring plan for its $23 billion offshore debt and being pushed into liquidation.
The delisting of Evergrande, which had a market capitalization of over HK$400 billion at its peak, adds to the gloom hanging over other developers scrambling to stay afloat and avoid liquidation. Developers are facing deteriorating cash flow, but their bondholders are resisting taking heftier losses on their investments, delaying negotiations between companies and creditors.
More than $140 billion, or more than 70%, of China property dollar bonds have defaulted since 2021, and the majority of them are still in various stages of being restructured. Advisers expect some developers, especially privately-owned ones, to go through multiple rounds of debt revamps as the property market continues to struggle, with property construction in China expected to decline another 30% by 2035 due to structural changes in demand.
