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Chinese property giant Evergrande has gone bankrupt, potentially threatening demand for Australian iron ore for steel production.
The future of Australia’s biggest export could be shaky after a Hong Kong judge, Linda Chan, ordered the country to cease operations due to a “lack of progress on the part of the company submitting a viable restructuring proposal.”
The glut of residential towers has left China’s second-largest apartment builder with debts of more than $400 billion, raising concerns among the Communist Party government about its solvency.
This will impact Western Australia, the world’s largest supplier of iron ore, as Evergrande’s liquidation undermines confidence in China’s property market.
Chinese real estate giant Evergrande has gone bankrupt, potentially threatening demand for Australian iron ore used to make steel (pictured is a commercial complex in Beijing’s Evergrande)
Evergrande had been granted an extension in December to restructure its debts.
Fergus Saurin, a lawyer representing a range of creditors, said Evergrande had avoided talking to them.
‘The company has not been successful in working with us. “There is a history of last-minute involvement that has gone nowhere,” he said.
In August 2020, Chinese President Xi Jinping’s government introduced a new “three red lines” policy requiring developers to sell assets, even at a cheap discount, to avoid piling up more debt they could not pay off.
The glut of apartment towers has caused China’s second-largest apartment builder to rack up debts of more than $400 billion, raising concerns among the Communist Party government about its solvency (pictured are residential buildings in Nanjing in the east of China).
Iron ore now trades at $137.50 a tonne, down big from $216 in July 2021 during the Covid pandemic, when Evergrande’s debt problems became a bigger concern.
Evergrande’s liquidation threatens to undermine confidence in the Chinese financial system, in the country of Australia’s largest trading partner.