The Guangzhou Intermediate People's Court has accepted the bankruptcy petition of Evergrande Real Estate, a construction company affiliated with Evergrande Group. This was announced in a court statement.
The company is unable to pay its debts and its assets are insufficient to cover all liabilities. In accordance with the Corporate Bankruptcy Law, the court accepted the petition for liquidation.
Earlier, the Shenzhen Intermediate People's Court sentenced Evergrande founder Xu Jiaying to life in prison for fraud and other financial crimes. Evergrande Group was fined 8.82 billion yuan ($1.3 billion) for multiple violations, while Evergrande Real Estate was fined 7 billion yuan ($1 billion).
From 2016 to 2021, Evergrande Group, Evergrande Real Estate and Xu Jiayin himself were involved in falsifying the company's financial statements. Xu Jiayin abused his position as chairman of Evergrande Real Estate and spent the company's assets under the guise of dividends. The court found him and his companies guilty of embezzlement of deposits, fraudulent financing, illegal lending, fraudulent issuance of securities, corporate disclosure violations and bribery.
In the past decade, Evergrande has gone from being China's largest developer to the largest bankrupt company in the country's history. The company borrowed to buy land, sold new buildings during the foundation phase, and used the proceeds to pay off creditors and finance its next real estate project. Evergrande’s development business has grown rapidly, while its debt has also increased.
Chinese authorities have focused on the risks of developers’ indebtedness during the COVID-19 pandemic, when the country’s economy was rocked by lockdowns, production shutdowns, and supply chain disruptions. In 2020, the government announced stricter controls on the debt burden of real estate companies, leading to a liquidity crisis at Evergrande. The entrepreneur falsified financial statements for a bond issue in 2020-2021. In January 2024, a court in Hong Kong ordered the forced liquidation of the company due to bankruptcy, and trading in its shares was suspended.
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