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China Evergrande gets building demolition order; share trading halted

Published 01/02/2022, 08:20 PM
Updated 01/03/2022, 12:02 PM
© Reuters. FILE PHOTO: The China Evergrande Centre building sign is seen in Hong Kong, China, September 23, 2021. REUTERS/Tyrone Siu/File Photo

By Clare Jim

HONG KONG (Reuters) -Cash-strapped property developer China Evergrande Group said on Monday it had been ordered to demolish 39 under-construction residential buildings on the resort island of Hainan, as its shares were suspended from trading.

Evergrande is struggling to repay more than $300 billion in liabilities, including nearly $20 billion of offshore bonds deemed in cross-default by ratings agencies last month after it missed payments.

Once China's top-selling developer and now at the heart of an unprecedented liquidity squeeze in the property sector, Evergrande has been scrambling to raise cash by selling assets and shares to repay suppliers and creditors.

The world's most indebted developer said late on Monday it had received an order from authorities at Danzhou city in Hainan province on Dec. 30 telling it to demolish 39 under-construction buildings at the Ocean Flower Island project.

It did not disclose the reason for the demolition order.

Reuters could not immediately reach the Hainan provincial authorities outside Asia business hours.

Local media reported earlier the buildings - stretched over 435,000 square meters - needed to be demolished within 10 days for illegal construction and environmental violations.

In a post on WeChat late on Monday, Evergrande said it had been rectifying the environmental issues since 2017.

It told the project's homeowners that it had spent 81 billion yuan ($13 billion) in the past six years to build over 60,000 homes, and the demolition order would not affect the rest of the development.

Ocean Flower Island is a mega resort development, comprising theme parks, convention centres and hotels.


Evergrande's shares were suspended from trading earlier on Monday pending the release of "inside information", it said in a Hong Kong stock exchange filing without elaborating.

The developer missed new coupon payments worth $255 million due last Tuesday < VG162759965=>, though both have a 30-day grace period.

As the list of Evergrande's unpaid creditors and suppliers continue to grow, the firm has set up a risk management committee with many members from state companies, and said it would actively engage with its creditors.

On Friday, Evergrande dialled back plans to repay investors in its wealth management products, saying each investor could expect to receive 8,000 yuan ($1,257) per month as principal payment for three months irrespective of when the investment matures.

"The market is watching the asset disposal progress from Evergrande to repay its debt, but the process will take time," said Conita Hung, investment strategy director at Tiger Faith Asset Management.

"And the demolition order in Hainan will hurt the little homebuyer confidence (that) remained in the company."

Evergrande said last week 91.7% of its national projects have resumed construction. Many projects were halted after the developer failed to pay suppliers and contractors.

Shares of Evergrande shed 89% last year, closing at HK$1.59 on Friday.

© Reuters. FILE PHOTO: The China Evergrande Centre building sign is seen in Hong Kong, China, September 23, 2021. REUTERS/Tyrone Siu/File Photo

Its electric vehicle unit China Evergrande New Energy Vehicle Group reversed early losses to rise 11% on Monday, while property management unit Evergrande Services also turned around from the red to rise 1%.

($1 = 6.3521 Chinese yuan renminbi)

Latest comments

china is fake economy until they switch to capitalism and democracy. they literally can force their ppld to buy their own products
Not really, given that the CCP is willing to let evergrande or other property developers fail without assistance.  You never see that in the US, with over 600 companies in the Russell 2k essentially only being able to pay for interest and not operating costs.  I'm not a CCP shill but you can't honestly believe the economy in the west is 'real' or even remotely capitalism anymore.
How's capitalism and democracy working out for you? Trump, stupid ********and gun laws, increasing inequality, stock market overpriced trash, corrupt politicians getting away with everything, two party country, extreme racism, white privilege made into law... literally anything is better than capitalism and democracy atm!
How big is the hole
I wouldn't trust anything they say. China real estate boom went boom. if China's lucky, they'll end up like Japan with stagflation as they keep manufacturing CRAP products. Other emerging markets will see to the end of their huge manufacturing sector and then they will need to step up their invasion of Taiwan. I wouldn't be surprised if Putin and Xi both launch invasions at the same time and right after our midterms
On the contrary, China is under huge pressure from young workers to lower housing costs, these developers failing and firesaling their assets would do wonders for them.  Again, you'll never see a western government actually do anything meaningful for skyrocketing property costs.
Does that mean MAGA? Or when it's Made In America, only the rich and greedy can afford it?
I guess you don't read? both Russia and China have been adamant about expanding their territories. suggesting that will never happen is naive
Shell game. Best to get out regardless the current loss.
Rinse n Repeat Fud 🤣🤣🤣
CCP Chinese junk.
 he wouldnt know the difference
This will soon crash the US markets too
Recycled stories; How about we try to provide context to the story rather than baffling readers?
Chinas paper tiger slowly crumbling
Uh oh...
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