A Hong Kong court has decided to liquidate China Evergrande Group

A Hong Kong court yesterday ordered the liquidation of property giant China Evergrande Group, dealing a further blow to confidence in the country's fragile property market as policymakers in Beijing step up efforts to contain the deepening crisis, writes Reuters.

According to the source, Evergrande has been unable to present a concrete restructuring plan more than two years after defaulting on offshore debts and following several court hearings. The real estate giant's total debt stands at $300 billion.

"It's time for the court to say it's done," said Judge Linda Chan, according to Reuters.

The decision sets the stage for what is expected to be a long and complicated process with potential political considerations, given that the decision is made in Hong Kong, thus involving numerous authorities. Offshore investors will be wary of how Chinese authorities treat foreign creditors when a company fails, the publication said.

Siu Shawn, the property giant's chief executive, told the media that Evergrande would ensure that its homebuilding projects would continue to be delivered despite the winding-up order. He added that the ruling will not affect the operations of Evergrande's onshore and offshore units.

"This is not an end, but the beginning of the prolonged liquidation process, which will further complicate Evergrande's daily operations," said Gary Ng, senior economist at Natixis, quoted by Reuters. "Since the majority of Evergrande's assets are located in mainland China, there are uncertainties about how creditors can seize assets and the degree of repayment of offshore bondholders, and the situation may be even worse for shareholders."

Evergrande shares fell as much as 20 percent before the hearing, after which trading was halted for both China Evergrande and its subsidiaries China Evergrande New Energy Vehicle Group and Evergrande Property Services, following the Hong Kong court ruling, according to Reuters.

Liquidation is a process by which a company's assets are seized and sold, with the proceeds later being used to repay outstanding debts. In this case, the liquidation may depend on the Chinese government, and the Hong Kong court's decision does not necessarily mean that Evergrande will collapse, according to the BBC.

Ahead of Monday's ruling, China's Supreme Court and Hong Kong's Department of Justice signed an agreement on the mutual recognition and enforcement of civil and commercial judgments between mainland China and Hong Kong.

But experts are still unsure whether this deal, which has just come into effect, will have an impact on Evergrande's winding-up order, according to the BBC. The Chinese Communist Party also appears keen to keep developers afloat, to ensure that those who purchased homes before construction began get what they paid for, the aforementioned publication added.

Evergrande's new problems come amid a troubled backdrop for the world's second-largest economy, which is grappling with slow economic growth, high youth unemployment and a troubled housing market.

But analysts believe that concerns about an imminent global catastrophe caused by the Evergrande situation are exaggerated. Instead, multinational corporations and their employees, as well as even individuals with no direct ties to China, will likely feel some of the effects. Hundreds of major global companies derive some of their revenue from the huge Chinese market, and reduced demand from that market could have knock-on effects for employees and suppliers, according to the BBC.

Evergrande Real Estate currently owns more than 1,300 projects in more than 280 cities in China, according to the company's website. The Evergrande Group includes much more than real estate development. In the last three years, Evergrande's shares have lost 99% of their value, the aforementioned publication also mentions.