Evergrande Fallout Shows China’s Real Estate Recovery Remains Out of Reach

Evergrande finally delisted from the Hong Kong Stock Exchange
Sudden regulatory tightening pushes other developers toward collapse
With no “way out,” the prolonged property slump weighs heavily on China’s economy

China’s largest private property developer, Evergrande, is being delisted from the Hong Kong Stock Exchange. The company, which defaulted after Beijing tightened real estate regulations in 2020, has failed to recover since. With the property market stuck in a prolonged slump, experts warn that the crisis is no longer confined to the sector itself but is now rippling through the broader Chinese economy.

Collapse of China’s No. 1 Developer, Evergrande

According to Bloomberg and other outlets on August 19, Evergrande announced it had received a letter from the Hong Kong Stock Exchange on August 12 stating that its listing status would be revoked. The exchange explained that Evergrande had failed to meet any of the requirements for resuming trading, and notified the company that delisting would take effect at 9 a.m. on August 25. Evergrande said it would not appeal the decision. This marks a formal delisting 18 months after the company was placed under liquidation by a Hong Kong court in January last year, which led to a trading halt.

Founded in Guangzhou, Guangdong Province in 1996, Evergrande expanded nationwide in the 2000s by building large-scale apartment complexes. Using a pre-sale model to secure liquidity, it aggressively acquired land and rapidly grew its market presence. At its peak, the company managed more than 1,300 development projects across over 280 cities in China.

The tide turned in 2020 when the Xi Jinping administration introduced the so-called “three red lines” policy, designed to cool the overheated property market and mitigate financial risks. The rules required a debt-to-asset ratio below 70%, a net debt ratio below 100%, and a cash-to-short-term debt ratio above 1. Developers that failed to meet these thresholds were barred from raising new debt. The policy abruptly cut off Evergrande’s access to financing, triggering its collapse.

Regulations Trigger Market Turmoil

The problem was that Beijing’s heavy-handed regulations came just as the economy faced deep uncertainty from the COVID-19 pandemic, accelerating a liquidity crisis in the property sector. Evergrande was particularly vulnerable, as it failed to meet all three of the “red line” thresholds, leaving it unable to take on new debt. By the second half of 2021, the company was plagued by defaults on commercial paper, delays in apartment deliveries, and unpaid bills for building materials. In December of that year, it missed a $260 million bond payment, which triggered cross-defaults on all its outstanding dollar bonds. At the time, Evergrande’s total liabilities had ballooned to 2.4 trillion yuan (about $642 billion).

Evergrande’s collapse was not isolated. Around the same period, two-thirds of China’s top 30 property developers had breached at least one of the red lines, cutting them off from fresh funding. Most developers had long relied on the pre-sale model for cash flow, while aggressively acquiring land through bank loans, trust products, and bond issuance—growth powered almost entirely by debt. Once liquidity dried up, this fragile model unraveled instantly, driving many firms into default.

The wave of failures caused chaos across the market. Developers in financial distress resorted to fire sales of apartments to raise cash, prompting local governments to ban discounting in a desperate attempt to stabilize housing prices. Those unable to unload properties or raise emergency funds had no choice but to exit the market altogether. In the first half of 2021 alone, more than 200 Chinese property firms shut down following the enforcement of the three red lines policy.

China’s Property Market Recovery Looks Elusive

China’s real estate sector, once a pillar of growth, has yet to return to normal after years of crisis. Instead of shrinking, industry-wide losses continue to mount. According to a recent report by Morgan Stanley, cumulative losses in China’s property industry between 2021 and 2024 are projected to reach 7 trillion yuan (about $1.03 trillion). Nearly half of that burden has fallen on the financial system, including 2.05 trillion yuan ($297 billion) in bank loan losses, 1.31 trillion yuan ($190 billion) in asset management and trust losses, and 500 billion yuan ($72 billion) in additional bank provisions. Beyond the financial sector, stock investors have lost 920 billion yuan ($133 billion), suppliers 1 trillion yuan ($145 billion), and domestic and overseas bondholders roughly 841 billion yuan ($122 billion) and 199 billion yuan ($29 billion), respectively.

Housing prices also continue to slide. According to Asia Finance, which released its “2025 Chinese City Housing Price Decline Rankings” in June, 11 cities have seen property prices fall more than 50% from their peaks. Wenzhou recorded the steepest drop at 63.52%, followed by Qingdao at 56.32% and Dongguan at 55.21%. Chongqing’s home prices fell 40.31%, while Shanghai registered a 31.09% decline.

Experts warn that if the downturn persists, China’s broader economy will face deeper stagnation. Real estate—including related industries—accounts for about 30% of China’s GDP. One market analyst noted, “China’s key growth engines are investment, consumption, and exports, but the property slump is severely undermining both investment and consumption. As development projects collapse, land sale revenues are shrinking, worsening the financial distress of local governments.”