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China's indebted real estate giant Evergrande suspends shares in Hong Kong

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By Euronews  with AFP
A woman passes by a display showing Evergrande's China commercial projects in Beijing, China, Tuesday, Dec. 7, 2021.
A woman passes by a display showing Evergrande's China commercial projects in Beijing, China, Tuesday, Dec. 7, 2021.   -   Copyright  Ng Han Guan / AP

One of the biggest Chinese real estate developers, embattled giant Evergrande, announced on Monday it was once again suspending trading of its shares in Hong Kong because of a massive meltdown in one of its developments in mainland China.

The country's property firms have struggled in the wake of Beijing's drive to curb excessive debt in the real estate sector as well as rampant consumer speculation.

Drowning in $300 billion (€265 billion) in liabilities, Evergrande has struggled to repay bondholders and investors after Beijing's crackdown suddenly turned off the liquidity taps.

"At the request of the company, trading in the shares of the company was halted at 9:00 am on January 3, 2022, pending the release by the company of an announcement containing inside information," the group said in a short statement on the Hong Kong stock exchange.

It previously saw a period of suspended share trading back in October.

The troubled developer was labelled as being in default by international rating firms last month after it failed to repay liabilities on time.

Earlier struggles to pay suppliers and contractors due to the debt crisis led to sustained protests from homebuyers and investors at the group's Shenzhen headquarters in September.

Last week, Evergrande momentarily cheered investors by insisting it would be able to deliver tens of thousands of units this month and pay off some debts.

But its shares took a dive at the end of the week after a report that the group had failed to meet two more offshore payments.

In recent months, the company has repeatedly said it will finish its unfinished projects and deliver them to buyers in a desperate bid to salvage its debts, despite having missed the earlier payment of more than $1.2 billion (€1.059 billion).

But in a new headache for the firm, local Chinese media reported over the weekend that it has been ordered to demolish 39 buildings by the authorities on Hainan island because the structures were built illegally on an artificial archipelago in the tourist hub.

The bloated firm has tried to sell assets and shave down its stakes in other firms, with chairman Hui Ka Yan paying off some of the debts using his own considerable personal wealth.

The provincial government of Guangdong — where the firm is headquartered — is currently overseeing Evergrande's debt restructuring process.

Evergrande's woes have had knock-on effects throughout China's property sector with some smaller firms also defaulting on loans and others struggling to find enough cash.

Baocheng Liu, director of the Centre for International Business Ethics at the University of International Business and Economics in Beijing, told Euronews that if Evergrande were to collapse, the "ripple effects are going to be huge".

"They are omnipresent in over 200 cities, both in second-tier cities and third-tier cities. So therefore there's going to be a massive movement from the consumers who paid the money and didn't really get their house," Liu explained.

"The nearly 100,000 people who work on those projects will lose their jobs. Companies working in the peripheral sector will also suffer a big deal. This is something that we are not really happy to see," he added.

Bloomberg News calculates that China's property firms need to stump up some $197 billion (€174 billion) to cover maturing bonds, coupons, trust products, and deferred wages to millions of migrant workers in January.

Watch the full interview with Baocheng Liu, director of the Centre for International Business Ethics at the University of International Business and Economics in Beijing, in the video player above.