With debts of more than $300 billion, Evergrande has become a symbol of China's property crisis, which has weighed on the economy
With debts of more than $300 billion, Evergrande has become a symbol of China's property crisis, which has weighed on the economy AFP

A Hong Kong court on Monday issued the liquidation of battered Chinese property giant Evergrande after lawyers failed to convince a judge it had a working restructuring plan.

Once China's biggest developer, Evergrande has reported more than $300 billion in liabilities and its troubles have become a symbol of a years-long property crisis that has dealt a massive blow to the country's economy.

A creditor in 2022 filed a winding-up petition in Hong Kong against China Evergrande Group -- which would begin the process of liquidation -- but the case has dragged on while parties tried to broker a deal.

High Court judge Linda Chan on Monday called for the liquidation of the firm given "the obvious lack of the progress on the part of the company in putting forward a viable restructuring proposal and the insolvency of the company".

"I consider that it is appropriate for the court to make a winding-up order against the company and I so order," Chan said.

She added that the court at the previous hearing in December "made it very clear it expected to see a fully formulated and viable proposal".

Shares in Evergrande plunged 20.87 percent to HK$0.16 in Hong Kong following the news, before the stock exchange halted trading at 10:19 am.

Trading was also halted in Evergrande's electric vehicle subsidiary.

Speaking after the morning session of the court adjourned, a lawyer representing an ad-hoc group of creditors told reporters that Evergrande had "failed to engage with us".

"There has been a history of last-minute engagement which has gone nowhere," said lawyer Fergus Saurin.

"The company has itself to blame for being wound up."

Chan is expected to hand down her detailed reasons for the winding up order in the afternoon and will handle the matter of appointing a liquidator.

The demise of Evergrande, which first defaulted on a debt payment in 2021 and declared bankruptcy in the United States this year, has been closely watched as it was once a pillar of China's economy.

China's construction and property sector once accounted for around a quarter of its GDP.

But Chinese President Xi Jinping deemed the debt accrued by Evergrande and other property firms an unacceptable risk for China's financial system and overall economic health.

Authorities have gradually tightened developers' access to credit since 2020, and a wave of defaults has followed.

By the end of June, Evergrande estimated it had debts of $328 billion.