Evergrande’s mainland unit faces liquidation as founder gets life term
A Guangzhou court accepted a liquidation case against Evergrande’s mainland unit, following founder Hui’s life sentence.
Chinese authorities are pushing forward with the long-awaited cleanup of the Evergrande real estate empire, which collapsed under roughly $300 billion in debt. On Friday, a court in Guangzhou accepted a bankruptcy liquidation case against the company’s mainland property development arm, the unit that industry data says carried most of the group’s liabilities.
The move came just a day after a Shenzhen court sentenced Evergrande’s 67-year-old founder, Hui Kan Yan, to life in prison for financial crimes. Several others linked to the group, including Hui’s sons, received prison terms of up to 18 years.
Restructuring experts say the latest steps suggest Beijing may have a clear plan for winding down the company. “They will need to do these sooner or later,” said Foreky Wong, a founding partner at Fortune Ark Restructuring. But he cautioned that Evergrande’s sheer size means bankruptcy proceedings will drag on.
The property sector, once a key engine of China’s economic growth and accounting for about a quarter of GDP a few years ago, remains in a deep slump. Home prices have fallen by roughly 20% or more since 2021, and demand is still weak in many smaller cities.
Evergrande’s troubles began after regulators cracked down on excessive borrowing in 2020, triggering a wave of developer failures. The company, once considered too big to fail, became the world’s most indebted developer. A Hong Kong court ordered the liquidation of its holding company in 2024 after creditors failed to reach a deal.
Because most of Evergrande’s assets are in mainland China, Hong Kong-appointed liquidators have limited ability to recover them. Legal experts note that the mainland ruling raises complex questions about competing claims on Hui’s assets. A Hong Kong judge had earlier barred Hui from disposing of his worldwide assets, valued at around $7.7 billion.
Investigations found that Evergrande overstated revenues by roughly $80 billion in 2019 and 2020. Accounting firm PwC, which audited the company, has faced fines in both mainland China and Hong Kong. Creditors are expected to recover only a small fraction of what they are owed—likely in the single-digit percentage range, according to Wong.