Evergrande shares suspended as stock plunges 20%

Court documents show the company has asked for a further three months to produce a new restructuring plan. When the company defaulted two years ago, it sent shockwaves through global financial markets – and has left many home buyers waiting for their new properties. It is the most indebted developer, with more than $300 billion of total liabilities. The impact of the latest court order could once again disrupt financial markets as the property sector accounts for as much as about a quarter of China's GDP, as IGTV’s Angela Barnes explains.

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Evergrande's liquidation

Evergrande, a Chinese property group, is facing a major crisis as its shares plunged by 20% after a Hong Kong court ordered its liquidation. With over $300 billion in liabilities, Evergrande is already the most indebted developer in the world. This situation is reminiscent of a default the company faced two years ago, which had a negative impact on global financial markets and left many homebuyers without their properties.

Evergrande's US bankruptcy

To protect its American assets, Evergrande filed for bankruptcy in the United States last year. While the company has been working on a new repayment plan, it has requested an additional three months to come up with a fresh restructuring strategy. This recent ruling by the Hong Kong court is expected to unsettle Chinese financial markets, especially because the property sector makes up a quarter of the country's gross domestic product (GDP). This adds to the existing concerns surrounding a sell-off in the stock market.

China's property sector

The challenges faced by Evergrande and the potential consequences of its current situation highlight the difficulties being experienced by China's property sector. The industry has been under increased regulatory scrutiny to curb excessive borrowing and speculative behavior. These regulations, combined with a broader market sell-off, have had a significant impact on Chinese developers, making it harder for them to repay debts and raising concerns about potential contagion effects on the financial system.

The crisis surrounding Evergrande also brings concerns for homebuyers who have invested in the company's properties. Many individuals are still waiting for the completion of their new homes, and this situation raises questions about potential delays and financial losses. This poses a significant test for the Chinese government, as their ability to manage systemic risks and prevent social unrest resulting from damaged consumer confidence in the property market will be put to the test.