📑 3 China Headlines #1
The most important headlines that international readers should pay attention to – and why they matter.
🔸 China Evergrande Liquidators Seek to Block $128 Million PwC Payout: Caixin
Liquidators for China Evergrande Group launched a legal challenge to block a HKD 1 billion (USD 128 million) payout from PwC Hong Kong to the collapsed developer’s minority shareholders, Caixin reported on 16 June.
Filing for a judicial review in the Hong Kong High Court, the liquidators argued that the private settlement brokered by the city’s securities regulator unlawfully prioritizes shareholders over creditors.
Evergrande’s liquidation has also prompted some partners at PwC’s Hong Kong and mainland China affiliates to explore strategies to safeguard their personal assets, with one of them even contemplating a divorce, according to a Bloomberg report.
Eveline: The liquidators are likely going hard after PwC, Evergrande’s long-time auditor, because there isn’t much to recoup onshore. Capital structure may not hold up in mainland China, where local homebuyers, suppliers or contractors tend to be prioritized over offshore creditors in a major debt restructuring partly because of the potential cascade effect throughout the economy.
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🔸 Chinese Homeowner Buys 34th Floor Flat in 32-Storey Building, Gets No Compensation: SCMP
A Chinese man bought a flat on the 34th floor of a newly developed building only to be told four years later that the building just had 32 floors, South China Morning Post (SCMP) reported on 8 June. A flat with limited property rights is an unofficial name for a kind of grey market housing developed illegally on collectively owned rural land.
Eveline: A buyside friend recently shared this story to illustrate the sort of surprises that could be in store when investing in China. The unfortunate homebuyer likely had limited recourse against the developer as he effectively waived away his legal rights in return for a purchase price that was around one-third of the average cost.
These unapproved projects reportedly occupy rural land left idle amid China’s urbanization. The news raises questions on the scale of such ‘grey’ flats in China and how many were left incomplete if developers ran out of money halfway through their construction.
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🔸 China’s Universities Cut 12,000 ‘Obsolete’ Degrees amid Race to Embrace AI Era: SCMP
China’s universities are undertaking a massive reshuffling of their academic offerings as part of a drive to better align higher education with the nation’s development goals, culling thousands of so-called obsolete degrees in favour of new, tech-focused programs, SCMP reported on 14 June.
Eveline: While the tech drive is aimed at mitigating China’s “graduate jobs crisis”, the industry is evolving so rapidly that it’s unclear whether the skills being learned by these students would make them more employable by the time they graduate from university.
For example, Caixin reported that over 140 companies in China are churning out hundreds of humanoid robotic models, sparking concerns about over-heating. “Founders and investors are increasingly worried that the industry is heading straight for ‘involution’ – the same ruthless, margin-crushing price wars that plagued the country’s EV market,” Caixin wrote.
Acrostics Asia is an independent credit intelligence provider that connects the dots across Asian sovereigns, private credit and restructurings.