The Real Estate Crisis in China Claims Another High-Profile Victim: The Shimao Group, a Reputable Developer, Faces a Liquidation Petition Filed by the China Construction Bank with the Supreme Court in Hong Kong. The Corporation Has Allegedly Failed to Meet Financial Obligations Amounting to Nearly 1.6 Billion Hong Kong Dollars (Approximately 186 Million Euros). Shimao Announced It Will "Vigorously" Defend Against This Move.

This case is part of a series of similar cases in which creditors are attempting to collect outstanding debts from highly indebted Chinese real estate companies. The choice of Hong Kong as the legal venue is not coincidental, but due to the stock listing of the Shimao Group there. The company is known in particular for its residential projects in major Chinese cities and for its involvement in hotel projects. The first court hearing is scheduled for June 26th.

Earlier this year, another Chinese real estate company, Country Garden, faced a similar petition. China Evergrande, the corporation with the most debt exceeding 300 billion US dollars, has also been ordered by a court to liquidate.

For years, the real estate sector was one of the most important drivers of growth for the Chinese economy. However, the crisis in this industry is now significantly burdening China's overall economic performance. The crisis was triggered in 2020 by the implementation of the "three red lines" policy by the Chinese government, which greatly restricted the borrowing of real estate companies to prevent speculation in the market. Many companies fell into financial difficulties, prompting the government to eventually take supportive measures and relax the rules for buying homes.

On the day of the announcement of the liquidation application against Shimao, its shares at the Hong Kong Stock Exchange plunged by 18.68 percent to 0.37 Hong Kong dollars.