Shimao Group is the latest major Chinese developer to face a liquidation event amid the country’s ongoing property crisis.
Shimao, in a statement, said it’s received a winding-up petition from the China Construction Bank over loans to the tune of 1.58 billion Kong Kong dollars (nearly US$202 million).
Shimao said it “will oppose the petition vigorously” and will work towards an offshore restructuring “that maximises value for its stakeholders”.
China’s property sector has been in crisis mode since 2021, due to a combination of high debt levels within property development companies, declining property sales, and plummeting real estate values.
The Chinese government, concerned about the overheating market and the high levels of debt in the financial system, introduced a series of regulatory measures aimed at curbing excessive borrowing by developers.
Dubbed the ‘three red lines’ policy, the government set strict criteria regarding debt levels that developers must adhere to to qualify for new borrowing.
This sudden tightening of credit put additional pressure on developers already struggling with debt repayments.
China’s two largest developers, Evergrande and Country Garden, have both faced liquidation petitions due to their spiralling debt obligations.
Shimao’s stock price on the Hong Kong exchange plummeted nearly 19% on Monday in response to liquidation fears.
“The company will keep its shareholders and investors informed of any significant development and further announcements will be made by the company as and when appropriate,” Shimao said.