Shimao Group Faces Winding-Up Case: Legal Troubles Escalate
China’s troubled property market encountered another setback as Shimao Group, a major real estate developer, faced a winding-up petition from state-owned China Construction Bank (Asia) in Hong Kong. The petition, filed over Shimao’s failure to repay loans worth HK$1.58bn, marks a significant move as it’s uncommon for Chinese banks to take such legal action against developers. Previously, similar cases against property firms were initiated by overseas-based creditors.
Shimao Group responded to the petition by stating it would vigorously oppose the lawsuit. However, the news had a substantial impact on its stock performance, with shares plunging by over 15% to hit an all-time low during Monday’s trading. This decline adds to Shimao’s challenges, as its shares had already lost a third of their value since the beginning of the year.
Shimao Group, like many other Chinese property developers, faced challenges, including defaulting on offshore bonds in 2022. To address its financial issues, the company recently outlined plans for debt restructuring. The situation echoes the struggles of other real estate giants in China, such as China Evergrande, which was ordered to liquidate by a Hong Kong court in January due to its substantial debt of over $300bn. Another major developer, Country Garden, also defaulted on its overseas debt last year and is facing a winding-up petition.
China’s real estate industry has been under significant pressure since 2021, following government measures to limit borrowing by large developers. As the property sector contributes around a third of China’s economy, the challenges faced by real estate firms have broader implications for the country’s economic landscape.
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