Linda Chan, the Hong Kong court judge who has just ordered the liquidation of Chinese property giant Evergrande, can be assertive. "[Considering] the evident lack of progress on the part of the company in presenting a viable restructuring plan, [it is] appropriate for the court to order the liquidation of the company," she ruled on January 29, marking the end of one of China's leading companies. Time will tell whether the decision ends the two-year financial downfall that heralded the collapse of one of China's leading sectors.
The future remains uncertain, as Hong Kong is a long way from Beijing, but the ruling represents a crucial step. Evergrande began its adventure in 1997, when it bought the land of a former insecticide factory on one of Guangzhou's main avenues in an auction. Its "Jardin Jinbi" project existed only on paper, but all of the apartments were sold within two hours. In those days, people queued day and night for the chance to secure a home.
In 2018, at the height of its glory, Evergrande was recognized as China's most powerful property company. Its boss, Xu Jiayin, had hailed from his village grocery store to become one of the country's richest men, and his football club was the most popular. Xu had also risen through the ranks of the Chinese Communist Party, which did not prevent him from owning a villa worth over 220 million dollars (203 million euros) in London. The firm even ventured into auto manufacturing, tourism, healthcare and cinema, among other sectors.
But after the government restricted bank lending out of concern over real estate speculation, a health crisis was all it took to bring down the house of cards. In 2021 the market experienced a 30% decline, and Evergrande declared itself insolvent for the first time. Xu Jiayin himself was suspected of fraud. Other giants fell in the aftermath.
Linda Chan's directive to appoint liquidators to sell assets in mainland China will be a test of the independence and power of Hong Kong's once-autonomous judiciary. Local courts where the subsidiaries are located will probably try to reverse the process, but the signal has nevertheless been sent about the Hong Kong financial center, once dominant but now deserted by foreign investors. The repercussions of the Evergrande crisis have only just begun to unfold.