Winning Bizness Desk

Evergrande collapse: China’s property giant faces liquidation as founder Hui Ka Yan gets life sentence

China Evergrande, once the world’s most valuable real estate brand, has reached the end of the road after a court accepted its bankruptcy petition, while founder Hui Ka Yan was sentenced to life imprisonment for financial fraud.

The company, which had built a vast property empire on aggressive borrowing and advance home sales, was carrying debt of more than $300 billion, equivalent to around Rs 28 lakh crore. Its collapse has left more than 1,300 unfinished projects across 280 Chinese cities and become one of the biggest symbols of China’s prolonged property crisis.

From rural roots to China’s property empire

Hui Ka Yan, 66, rose from a poor rural background to become one of China’s richest men by building Evergrande into a sprawling business empire. The company expanded beyond housing into skyscrapers, football and other businesses.

Its growth model was straightforward but heavily dependent on debt: buy land, sell flats before construction was completed, collect advance payments from buyers and use the money to fund the next project. The strategy worked as long as credit remained cheap and property sales kept rising.

Evergrande’s brand value soared during China’s urbanisation boom. According to Brand Finance, it became the world’s most valuable real estate brand in 2018, when its brand value jumped 118% year-on-year to $16.2 billion.

Beijing’s debt crackdown triggered the collapse

The turning point came in 2020, when China introduced the “three red lines” policy to curb excessive borrowing by property developers. Evergrande, which relied heavily on fresh borrowing and homebuyer advances, suddenly found access to cheap credit tightening.

As property sales weakened and new borrowing became difficult, its cash flow began to dry up. The company eventually defaulted, leaving creditors, homebuyers and suppliers facing a huge financial mess.

The key indicators behind the crisis were:

• More than $300 billion in debt.
• Over 1,300 unfinished projects across 280 cities.
• Trading in its Hong Kong-listed shares was suspended for 18 months.
• Evergrande was delisted from the Hong Kong Stock Exchange on August 25, 2025.

Courts move against company and founder

The Guangzhou court accepted a liquidation petition filed by Guangzhou Rural Commercial Bank after concluding that Evergrande was unable to repay its debts and that its liabilities far exceeded its assets. The ruling effectively set the company on the path to a complete legal shutdown.

A Shenzhen court separately sentenced Hui to life imprisonment after finding him guilty of fraud and financial misconduct. His political rights were also revoked and his personal assets ordered to be confiscated.

The court also imposed heavy fines on companies linked to the founder, including 8.82 billion yuan on China Evergrande and 7 billion yuan on Hengda Real Estate.

Homebuyers bear much of the fallout

Evergrande’s collapse has had a direct impact on ordinary Chinese homebuyers. More than 1,300 projects were left unfinished when the company ran into trouble, raising fears that buyers who had already paid for homes would be left with neither houses nor easy refunds.

The Chinese government has largely prioritised domestic homebuyers over overseas creditors and directed developers to focus on completing unfinished housing projects. The property crisis has also weakened consumer confidence in China’s housing market.

Why this is not China’s Lehman moment

Despite the scale of the collapse, economists do not see Evergrande as a repeat of the 2008 Lehman Brothers crisis. Lehman’s failure was deeply connected to the international banking system and triggered a global financial shock.

Evergrande’s debt problems have instead been managed gradually by Chinese authorities, limiting the immediate threat to the country’s banking system and reducing the possibility of a sudden global financial meltdown.

Property crisis weighs on wider economy

The consequences, however, have been significant for China. Real estate and related activities had accounted for roughly a quarter of the country’s economic output. As construction slowed, demand for steel, cement and other building materials weakened.

The crisis also hurt local governments, which had relied heavily on income from land sales. Falling property values and unfinished housing projects further damaged public confidence.

For policymakers, the Evergrande saga underlines the risks of growth driven overwhelmingly by debt. India’s real estate sector also has a clear lesson: stronger escrow mechanisms, tighter project monitoring and timely delivery rules are essential to protect homebuyers.

Three red lines that exposed Evergrande’s risks

China’s “three red lines” framework was designed to restrict developers carrying excessive financial risk. Its key conditions included:

• Liability-to-asset ratio below 70%, requiring developers to maintain at least 30% of their assets through non-debt funding.
• Net debt-to-equity ratio below 100%, limiting net borrowing against a company’s capital.
• Cash-to-short-term debt ratio above 1, meaning developers needed enough cash to cover debt falling due within a year.

Evergrande’s downfall shows how quickly an apparently unstoppable property giant can unravel when borrowing, sales and cash flow weaken together. Its collapse is now being viewed as a warning against building a long-term growth model on ever-rising debt and property prices.