BANGKOK (AP) — Shares in China Evergrande were removed from the Hong Kong Stock Exchange on Monday, marking another step in the retreat of the giant real estate developer whose downfall contributed to a prolonged crisis in China’s property market.
Evergrande’s creditors are still working to wind up debts that amounted to more than $340 billion. Once China’s second-largest developer, it ran into trouble when Chinese regulators cracked down several years ago on what they deemed to be excess borrowing by developers.
That caused dozens of property companies to default on their debts, triggering a downturn in the property market that is still dragging on the world’s second-largest economy.
Here’s what to know about Evergrande:
The delisting of a one-time leader in China’s property market
The Hong Kong Exchange said Monday that Evergrande’s shares were delisted as of Monday morning, as expected. The shares were last traded on January 29, 2024, and then suspended after a court in Hong Kong ordered liquidation of the company when it failed to provide a viable debt restructuring plan.
Rules of the exchange stipulate that a company’s share listing may be canceled if trading in its securities is suspended for 18 straight months.
Evergrande’s role in China’s property crisis
After years of warnings that led to global rating agencies cutting the Chinese government’s credit rating in 2017, the ruling communist party cracked down on real estate debt in 2020. It imposed controls known as “three red lines” that prohibited heavily indebted developers like Evergrande from borrowing more to pay off bonds and bank loans as they matured.
Fears of a possible Evergrande default in 2021 rattled global markets, but they eased after the Chinese central bank said its problems were contained and Beijing would keep credit markets functioning. Evergrande was one of the biggest of many developers that failed to repay their creditors.
Chinese home buyers often pay up front for apartments before they’re even built. The credit crunch for Evergrande and other developers led them to suspend construction, leaving many projects in limbo. The slowing of home purchases and building rippled throughout the economy, hitting demand for construction materials, appliances and even vehicles at a time when China was also contending with disruptions caused by the COVID-19 pandemic.
Since most Chinese families have their wealth tied up in property, the anemic housing market has been a major factor crimping consumer spending.
