A Hong Kong court on Monday ordered the liquidation of China Evergrande Group, China’s biggest property developer, a decision that is likely to add to the turmoil in China’s financial markets as authorities struggle to contain a worsening housing crisis, the BBC and Reuters reported. to Agerpres.

“It has to stop there,” Judge Linda Chan said after the developer repeatedly failed to come up with a plan to restructure its more than $300 billion in debt and defaulted on its obligations for more than two years.

Evergrande General Manager Siu Sean told Chinese media that the company will ensure the completion of residential projects despite the Hong Kong court ruling. He added that the decision will not affect the work of Evergrande’s domestic and foreign divisions.

“This is not the end, but the beginning of a long liquidation process that will further complicate the daily work of Evergrande. Given that most of the company’s assets are in China, there is uncertainty about how creditors can seize assets, and the situation is even more difficult for shareholders,” said Gary Ng, an economist at Natixis.

Evergrande’s share price fell ahead of the decision

On the eve of the court hearing, shares of Evergrande fell by 20%. Trading in the securities of China Evergrande and its listed subsidiaries China Evergrande New Energy Vehicle Group and Evergrande Property Services was suspended following the verdict.

China has experienced a real estate boom since the market was liberalized in 1998, in a country where buying a home is often a prerequisite for marriage and investment. Real estate companies were able to grow quickly thanks to bank loans, but their debt levels have grown so much that the authorities have decided to stop loans from 2020.

Since then, builders’ access to credit has shrunk significantly, and demand for real estate has plummeted amid the economic downturn and the challenges of pandemic restrictions.

Concerns about Evegrande’s solvency, China’s housing market as a whole and other structural problems facing the Chinese economy sent Chinese shares falling to near five-year lows last Monday, even though the government, led by Premier Li Qiang announced that it would increase medium- and long-term financial infusions into the capital market to stabilize it.

Foreign investors sold off stocks held in China

Foreign investors have sharply reduced their exposure to China’s stock market since the second half of last year amid concerns about the country’s economy under President Xi Jinping and fears of a housing market collapse.

After peaking at 235 billion yuan in August, net foreign investment in Chinese stocks has fallen 87 percent this year to just 30.7 billion yuan, according to a Financial Times analysis based on official data.

Thus, the Chinese stock market ended last year with the lowest level of foreign investment since 2015.

A key turning point for investors came in August, when another Chinese property giant, Country Garden, defaulted for the first time on the bonds it issued and warned it was at risk of default.

Since then, China’s stock market has seen a net sell-off by foreign investors on fears that problems in the housing sector could spread to other markets.

PHOTO Article: Tse Pui Lung, Dreamstime.com.