Jan 29, 2024: In a significant development, a Hong Kong court issued an order on Monday for the liquidation of China Evergrande Group (HK:3333), a decision expected to have far-reaching consequences in China’s financial markets, which are already grappling with a deepening crisis. The reaction in the market was swift:
Trading in shares of China Evergrande, China Evergrande New Energy Vehicle Group, and Evergrande Property Services was immediately halted.
The benchmark Hang Seng Index recorded a 1.2% increase.
Commentary from Lance Jiang, a restructuring partner at Ashurst, highlighted the critical aspects that the market will be closely monitoring. The appointment of liquidators raises questions about their capabilities and the potential for recognition from any of the three designated PRC courts under the 2021 Arrangement regarding Cooperation on Cross-border Insolvency Cases between the Mainland and the Hong Kong SAR. The recognition is crucial, as liquidators will face limited powers of enforcement over onshore assets in mainland China without it.
Jiang also emphasized that if Evergrande enters bankruptcy administration by a PRC court, international investors will closely observe whether the PRC court-appointed administrator can collaborate effectively with the liquidators appointed by the Hong Kong court. The hope is for a transparent, cooperative, and fair restructuring or liquidation of Evergrande.
Adding to the analysis, Chris Beddor, Deputy Director of China Research at Gavekal Dragonomics in Hong Kong, is likely to provide insights into the broader implications of this development on China’s economic landscape.