Last week a Hong Kong court ordered liquidators to sell the assets of the defunct property developer, China Evergrande Group. Since 2021, Evergrande was reportedly trying to restructure it’s $300 Billion debt. The judge in the case, Linda Chan, said Evergrande was not negotiating in good faith and the charade should end.
Ever since the CCP instituted the 3 red line policy, property development companies like Evergrande haven’t been able to raise capital to continue what was essentially a Ponzi scheme.
Evergrande’s assets totally around $240 billion, are significantly less that it’s debt. Creditors say that foreign debt is around $25 billion. “It is indisputable that the company is grossly insolvent and is unable to pay its debts,” according to court documents.
Most of China’s 120 property development companies, including the largest, Country Garden, failed the 3 red line test. All of them are either insolvent or near insolvent.
The court order only affects the Hong Kong-listed Evergrande unit. But this is a test case to see if mainland China will abide by the court’s ruling. 90% of Evergrande’s business is in mainland China and may not be affected by the court-order.
Few, if any of the creditors, will receive any money from the liquidation of Evergrande.
This is the big scam behind China’s huge GDP growth over the last 10-15 years. It was all a façade. Now, China’s stock market is collapsing, too. The CCP is trying to pump money into the market to keep it up, but everyone knows that that’s all that is keeping the market up, not the inherent value of the companies. So, the companies are virtually worthless.
China will attempt to contain the effects of the collapse of their real estate market, but it is unlikely that they’ll be able to do so.