Evergrande liquidation: What's behind China's biggest corporate fail ever | DW News

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now one of China's largest real estate

developers has been ordered to liquidate

by a court in Hong Kong evergrand is the

world's most indebted developer with

more than 270 billion EUR worth of

liabilities the order came after efforts

to strike a deal with creditors failed

but the liquidation process could be

complicated numerous authorities are

involved and there are political

considerations as well liquidation could

have a major effect on China's economy

and Global

markets massive sprawling and unfinished

for years now no work has been done on

any of the sites where Chinese real

estate giant ever Grand once planned to

build homes for millions of wanabe

homeowners and likely no work will be

done for a long time as the property

developer is being wound up in the most

spectacular corporate downfall in

China's

history it all started here in shenen a

special economic zone where the Chinese

Communist party was experimenting with

capitalism here evergrand was founded in

1996 at a time of China's great

urbanization when Millions from all

across the country flocked towards the

cities it led to a housing boom unlike

any the world had ever

seen evergrand was fast to build CH

apartment projects but not fast enough

to satisfy Dem and the company accepted

down payments for apartments it never

built soon after that money was gone

much of it spent on more plots for

future development on banking fees in a

desperate effort to raise more cash and

on Executive pay that turned ever

Grant's founder we cayan into one of the

world's wealthiest people in the midst

of a liquidity crisis ever Grand found

itself unable to pay its bills to

construction workers painters and real

estate agents soon the company's dead

snowballed into $140 billion further

construction was halted and while the

courts rule over everg Grant's future

giant developments sit unfinished

insiders estimate they can hold up to

1.4 billion

people let's go straight to Hong Kong

and speak to DW's Phoebe Kong Phoebe

what more can you tell us about this

Court

ruling well I'm standing outside the

court which uh just order um the Chinese

uh giant the developer aant to liquidate

this morning um that the judge said um

that um the over the past 18 months

since the initial petitions uh was filed

by a Hong Kong based uh company top

shine and later joined by other offshore

uh creditors um that the whole um

petition hearings that has been

postponed for seven times and now now

it's finally happening because the the

court um feel that it wasn't convinced

by F Grand that it has uh like moved

forward with a viable restructuring plan

to restructure is over uh $300 billion

dollar debt um that it has uh it has

accumulated over uh the years and that

the court um like the judges said um the

judge said um it will uh like later in

the coming hours in the afternoon that

it will layer more details of the

reasoning and also the arrangement of

the uh liquidation process what where we

expect that uh it will appoint a

liquidator to uh to officially kick off

the winding up uh

procedures well as you say Phoebe uh

everr has racked up hundreds of billions

of dollars in debt it it's already

defaulted on some of that debt H how did

it get itself into this

mess well uh we have to bear in mind

that Igan being one of the legendary

Chinese uh property Giants that it

heavily relied on the chain of debt to

expand and sustain its business in

various sectors not limited to um uh

building businesses but also uh like all

kinds of electric vehicles and all kinds

of other industries that it has Ste in

and uh we have also have to bear in mind

that uh in 2020 that Beijing authorities

has uh implemented uh some restrictions

on the borrowing policy on Developers

that um directly prompted um that the a

grant as U that that they couldn't

borrow money that easily compar compared

to previous period so um that was the

beginning of the so-called slow motion

collapse of the property Giant and

everyone now is facing a forthcoming uh

liquidation process that we're expecting

that um the Liquidator would uh like um

uh identify and also to calculate all

the assets

um not only in Hong Kong but also in

mainland China so it would take years

and uh it has a big questions to whether

this uh order could um could be applied

in mainly China um like completely and

also how the creditors could access and

claim uh the exess um of everr in

mainland China that that would be the

coming questions that um that everyone

will close to watch about this phoe as

you were talking to us just there we

were looking at some pictures of

finished apartment buildings huge

projects evergrand is responsible for

building homes for millions of people in

China how much of a problem will this be

for the Chinese

government well um very importantly um

the property sector has um it accounts

for 25% of China's GDP growth so so it

is uh like really the major engine of um

the economic growth of China so um so

it's not only an economic problem and

it's not only the problem of this um uh

property Empire but also the government

itself because like it's now uh has

evolved into kind of like a confidence

crisis it's not only a debt crisis but

also a confident crisis that uh affect

not only the market but also the general

public that many ordinary home buyers

are affected because they couldn't get

um the property after paying the debt so

um the the impact and also the effect is

very like widespread across China so um

it has to be something that has to be

dealt with um by the Chinese authorities

very delicately and we are expecting

some more measures that the China

government is trying to contain the

damages brought by uh e ground and also

uh other uh companies that facing de

crisis phbe thank you very much that was

our correspondent Phoebe Kong in Hong

Kong well for more on this we're joining

here in the studio by L halter from our

business desk L tell us more about the

implications of this liquidation order

forever Grand could it have effects on

markets Beyond China oh it very well

could Terry obviously uh because we have

to just look at China's role in the

world and how the economy there has been

doing as of late and obviously China and

the Chinese economy was still the engine

of the world's economy for a couple of

years now we have seen very rapid growth

here you might remember for the the last

couple of years we've really seen double

digit economic growth in China and now

that has pretty much Fallen apart of

course much of it is also covid related

still last year we saw GDP growth of

just uh 5% or so and in other countries

that would be massive but for China and

compared to their numbers that is really

weak and we have to see how important

the construction and the development

sector is in that that was massive and

now obviously this whole story is

entirely weakening that sect even more

and a lot of the western world is still

dependent on China I mean we've seen

we're seeing this drisking strategy

where the West is trying to grow a

little less dependent on China but we

still are at this point whether it's for

supplies for some companies for others

it's the market evergrand has billions

of dollars in debt uh it's already

defaulted on part of that the the judge

said there's no viable restructuring

plan in place what about the creditors

can they expect to get their money back

it's going to be tough for them they

might get some money back but certainly

not a lot as you said there's no

liquidity it's all basically in those

ginormous buildings that we've seen

everywhere so there was a recent

analysis by Deo and they said that the

return rate or the recovery rate we

should say for creditors is probably 3

and a half% but then we also saw some

investigations into crimes and

mismanagement and they actually lowered

that number close closer to 3% even so

there is likely just not much money

coming back to creditors at all now

everr is responsible for building

millions of homes in China people are

supposed to be living in those homes uh

how much of a problem is this for the

Chinese government there's definitely a

massive problem I mean yeah we've seen

this urbanization over the last couple

of years or decades actually and there

are people who are desperately waiting

uh to move into these apartments with

their family the cities have been

growing and for many are terrible there

they've been waiting for these stories

now uh we just got a statement here from

ever Grant's vice president shaen and he

says that they will ensure homes under

construction are delivered to buyers but

of course we don't know what that is

even worth a lot of the buildings will

get sold uh who's buying them how long

is it even going to take at this point

no work has been done in many of these

uh developments for the last two years

or so some are actually in a threat of

being torn down because they were built

without licenses so it's really I would

say impossible to say right now what is

happening to how many of these buildings

quite a mess L halter from my business

Nest thanks very much

sure