For Evergrande, this may be the end, but for creditors, it is just the beginning.
At 9:30 a.m. on January 29, the High Court of Hong Kong held a hearing on the winding-up petition against Evergrande Group. In the end, the court issued a winding-up order for Evergrande, which means that the incident regarding Evergrande's liabilities has come to an end for the time being.
The winding-up petitioner, Jiasheng Global, as a creditor, filed a winding-up petition against Evergrande in June 2022. Since then, this lawsuit has been postponed many times, and today, it has lasted more than half a year, and it can be regarded as a happy ending.
Evergrande Group used to be one of the giants of real estate developers in China, but in 2021, it defaulted on its debts, with its total liabilities exceeding 300 billion US dollars, which is converted to more than 2 trillion yuan.
What is a winding-up order?
In fact, this is a common means of debt collection under the Hong Kong legal system, and the issuance of a winding-up order by the court means that the company will enter bankruptcy liquidation proceedings, but it is not clear whether the winding-up order issued by the Hong Kong court will be enforced in the mainland.
For Evergrande, this is still an unknown.
As early as two years ago, in fact, winding-up orders were practiced in Shenzhen, Shanghai and Xiamen, recognising bankruptcy orders in Hong Kong. However, in practice, due to the differences in the legal systems of the two places, it has been difficult to enforce a winding-up order, and so far, there has been only one such order in the Mainland.
Therefore, although Evergrande is a mainland listed company in Hong Kong, it is still unclear whether the winding-up order of the Hong Kong court will be applied.
However, if we recognise the winding-up order, then it means that Evergrande will be placed under the management of the liquidators, who will try to sell all of Evergrande's assets to repay creditors, which is a way to protect the rights and interests of creditors.
If the liquidator determines that the company has sufficient assets, they can propose a new debt restructuring plan to overseas creditors.
However, Evergrande's past debt restructuring plans were rejected by creditors, which also means that the two sides have not reached an agreement on this issue.
Whether it is admitted or not, Evergrande's winding-up order has always been of some leading significance, because in the next few months, several domestic real estate developers will face winding-up orders from the court.
Therefore, Evergrande, as one of the "leaders", is also very likely to bring a certain reference significance to the next liquidation order.
From this point of view, Evergrande's liquidation order this time will get off to a good or bad start.
Why?
From the creditor's point of view, a winding-up order is of course a good thing, and the sale of assets to repay debts is a matter of course in itself, and it is also a protection of the rights and interests of creditors.
But judging from the impact of the entire market, it is not too good.
After all, once you enter the bankruptcy liquidation procedure, then the unfinished, to be built real estate, will be a big problem, we often say that sunk costs are not costs, but in fact, those who have built half of the real estate, how to dispose of it, itself is a problem.
Furthermore, Evergrande's incident will also serve as a warning to other real estate developers, bankruptcy and liquidation, which almost means that Evergrande has no possibility of a comeback, once the liquidation order is implemented, Evergrande, the real estate giant, is also coming to an end.
What's more, real estate developers are facing bankruptcy liquidation, and Evergrande is not the only one.
There are also several domestic real estate developers facing the possibility of forced bankruptcy, while spending by construction companies has fallen by 10% annually for two consecutive years, according to the latest data, in December last year, the country's 100 largest real estate companies have seen a 34% year-on-year decline in new home sales6% to 451.3 billion yuan.
Most of the trillions of yuan owed by Evergrande are deposits paid by ordinary families to buy new homes, so the priority of these families is also a question in the relevant liquidation process, and whether to pay to foreign creditors or these families is still a dilemma.
Last month, Oxford Economics also estimated that it will take 4-6 years to solve the problem of unfinished buildings in China.
And Evergrande's liquidation order is undoubtedly a signal.
For Evergrande, of course, it is not good news, which means the end of Evergrande, but for many parties who have been damaged by Evergrande's interests, bankruptcy liquidation can at least make up for some of the losses.
When it comes to Evergrande, we have to mention another leading real estate developer, that is, Country Garden.
In August 2023, Country Garden also fell into a default crisis, with losses of US$6.7 billion in the first half of this year, and in September, Country Garden received approval from creditors to extend the repayment period of six onshore bonds by three years, which was a respite.
According to the Bureau of Statistics, as of the end of August last year, the total floor area of unsold houses in the country was equivalent to 7.2 million units, not including the large number of residential projects that had been sold but not completed due to cash flow problems.
In the final analysis, most of the problems faced by real estate developers today are basically caused by the imbalance between supply and demand, these real estate developers ignore the basic supply and demand relationship of the market, and are still using a large amount of money to build buildings when the supply has reached saturation.
This is the root cause of the default crisis of real estate developers, which is that there is not enough cash.
Therefore, many people don't understand that the property market is already so high today, why should it stimulate the property market and encourage people to buy houses?
Because the real estate industry has decided that only by further stimulating the property market, the financial problems faced by developers can be alleviated to a certain extent.
However, to stimulate the property market, it is inseparable from the most fundamental things, price limits and purchase restrictions.
Although Guangzhou has released the purchase restrictions of more than 120 square meters, other first-tier cities have not yet been released, and new houses are also controlled.
According to the general laws of economics, the demand theory we know that the demand for a commodity is strongly correlated, the lower the demand, the higher the demand for it, but due to the existence of the price limit, this leads to the real estate developer even if he wants to reduce the price to inventory and reduce the price, but it is also possible to violate the Ministry of Housing and Urban-Rural Development's control, so as to be punished, or corrected.
So, why can't the house sell? In addition to the saturation of people's needs, there is another key factor, that is, ** control.
This is the big crisis that follows.
Because once this problem is not resolved, I am afraid that more real estate developers will face the possibility of bankruptcy and liquidation in the coming months, and once the scale of the real estate developer collapse wave, the confidence of the industry will be dealt a more fatal blow.
So I think,The next key point is actually to completely liberalize the real estate industry, so that the industry can completely return to the market, return to the nature of the commodity, as long as the developer is willing to reduce the price, then give the developer full pricing autonomy, let the commodity return to the essence of the market, let the demand decide, not let other decisions.
Only in this way can the real estate industry be further put back on track and return to the mean.
Otherwise, it will still be difficult for real estate developers to sell their houses, and if the funds cannot be recovered, then it may only be a matter of time before there is a default, which is a difficult situation to ride.
As for what to do if the price of the house is reduced and what to do if the family assets are damaged, my answer is actually very simple, can we make the house price never **?
So what is the difference between this and a planned economy? Can an industry's assets never be? Looking at the world, we can't find such an industry, nor can we find such a market.
Housing prices don't fall today, and sooner or later they will fall in the future, it's just a matter of time, we can build a lot of dams to block the water level**, but which is better, dredging or congestion?
The answer to this question is self-explanatory.
Today's housing prices, in fact, have long been "sunset housing prices", which look very dazzling, but they are just the last light before the darkness.
Housing prices are high, and it is not that many young people are burdened with huge pressure and bear huge social burdens, but in terms of our income alone, high housing prices are also an inevitable objective fact, which we cannot ignore.
Whether it is from the perspective of the house-price-to-income ratio or the rent-to-sale ratio, high housing prices are objective facts, which is the key reason why we need to open up real estate.
Otherwise, there will be more developers facing cash flow difficulties in the future, and if they can't get back the funds to bail out, then no matter how high the house price is, it may not make much sense to sell.
The damage to family assets is also the inevitable price of the times, although this is light, but it is also helpless.
China's family home ownership rate is indeed very high, far more than the general economy, more than 80% of families have their own housing, this number is placed in the major economies, are very high, which also brings a bad result, that is, once the housing price is **, the evaporation of wealth will be trillions.
In 2021, the average of new residential buildings in the city was about 10 times the average wage, and as of today, the fermentation of the real estate bubble has been too long and too long, but it is not too late to make amends.
We need to recognize the basic fact that the evaporation of family wealth is not the fault of real estate itself, but the real fault is that too many families do not correctly identify their own position, or they treat the house as something else under the constraints of hard conditions such as marriage.
The house is actually used to live, regardless of the land transfer money or others, the purpose of the house will not change, since it is lived, since it is a commodity, there will be fluctuations on the **.
The real crisis is that many people throw half of their life savings into it, whether it is evaporated wealth or depreciated assets, and this half of their life savings into the house is probably the uneasy for many people.
end.Author: Luo sir, the workplace reference of the new youth. Concerned about the logic behind the development of things, optimistic pessimists. Follow me and grind the knowledge to you.
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