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China’s mega developer Evergrande plunges into liquidation amid economic earthquake: Here’s what it means for Australia

  • Evergrande apartment building in liquidation
  • Chinese demand for Australian iron ore has been affected

Chinese property giant Evergrande has plunged into liquidation, potentially threatening demand for Australian iron ore used to make steel.

The future of Australia’s biggest export could be in trouble after Hong Kong judge Linda Chan ordered it to wind up due to «lack of progress by the company in putting forward a viable restructuring proposal».

A glut of apartment towers has left China’s second-biggest homebuilder saddled with more than $400 billion in debt, prompting the Communist Party government to worry about its solvency.

This has implications for Western Australia, the world’s largest iron ore supplier, as Evergrande’s liquidation undermines confidence in China’s property market.

Chinese property giant Evergrande plunged into liquidation, potentially threatening demand for Australian iron ore used to make steel (pictured is the Evergrande shopping complex in Beijing)

Evergrande was given a reprieve in December to restructure its debts.

Fergus Saurin, a lawyer representing a number of creditors, said Evergrande had avoided talking to them.

“The company was unable to contact us. It was a history of last-minute engagements that went nowhere,” he said.

In August 2020, Chinese President Xi Jinping’s government introduced a new «three red lines» policy that requires developers to sell assets, even at a cheap discount, to avoid accumulating more debt that they cannot service.

A glut of apartment towers has left China’s second-biggest apartment builder saddled with more than $400 billion in debt, prompting Communist Party government concerns about its solvency (pictured are residential buildings in Nanjing, eastern China)

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Iron ore is now trading at $137.50 per metric ton, down from $216 in July 2021 during the Covid pandemic when Evergrande’s debt problems became a bigger problem.

The liquidation of Evergrande threatens to undermine confidence in the Chinese financial system, the country of Australia’s biggest trading partner.

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