China Evergrande Faces New Trouble as Trading Halted and Demolition Ordered

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What is China Evergrande?

China Evergrande Group is one of the largest and most indebted property developers in the world, with more than $300 billion in liabilities. The company has been struggling to repay its creditors and investors amid a tightening regulatory environment and a slowdown in the real estate market. Evergrande’s financial woes have raised concerns about the stability of China’s property sector and the potential spillover effects on the global economy.

Why did Evergrande suspend trading in Hong Kong?

On Monday, January 3, 2023, Evergrande announced that it had suspended trading of its shares and bonds in Hong Kong, pending the release of “inside information” that could affect its stock price. The company did not provide any details about the nature of the information, but some analysts speculated that it could be related to its restructuring plan or asset sales. Evergrande has been trying to raise cash by selling some of its businesses and properties, but has faced difficulties in finding buyers and completing deals.

What is the demolition order that Evergrande received?

On the same day that Evergrande halted trading, it also confirmed that it had received an order from the authorities in Danzhou city, Hainan province, to demolish 39 buildings that were under construction at its Ocean Flower Island project. Ocean Flower Island is a massive resort-style development that covers 381 hectares of reclaimed land and features luxury hotels, villas, theme parks, and a marina. Evergrande did not disclose the reason for the demolition order, but local media reported that the buildings were built illegally, without proper permits and approvals. Evergrande said that the order affected only a small portion of the project and that it would comply with the authorities’ decision.

China Evergrande Faces New Trouble

What are the implications of Evergrande’s latest troubles?

Evergrande’s latest troubles have added more uncertainty and pressure to its already precarious situation. The company has been in default on some of its offshore bonds since November 2021, and has been unable to pay interest on others. It has also failed to honor its obligations to its wealth management product investors, who have staged protests and demanded refunds. Evergrande’s stock price has plunged by nearly 90% in 2022, and its bonds have traded at deep discounts. The company’s fate depends largely on whether it can reach a deal with its creditors and regulators, who have been closely monitoring its situation and trying to prevent a disorderly collapse. However, the prospects of such a deal remain unclear, as Evergrande faces legal challenges, regulatory hurdles, and public backlash. Evergrande’s troubles have also cast a shadow over the broader property market in China, which accounts for a significant share of the country’s economic output and social stability. Many other developers have also faced liquidity problems and rating downgrades, as the government has tightened its rules on borrowing and speculation. The property slump has also weighed on consumer confidence and spending, as well as on the demand for commodities and construction materials.

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