By Clare Jim

HONG KONG (Reuters) – China Evergrande Group’s shares soared briefly in resumed trade on Tuesday after the developer said a government order to demolish 39 buildings on the resort island of Hainan would not affect the rest of its massive project there.

The firm, struggling to repay more than $300 billion in liabilities, also said its contracted sales for 2021 had plunged 39% from the previous year to 443 billion yuan ($69.5 billion).

Its shares surged as much as 10% in Hong Kong before trimming gains to close 1.3% higher at HK$1.61, compared to a 3.5% rise in the broader Chinese property sector.

Evergrande’s shares were suspended from trading on Monday until Tuesday afternoon, pending the release of a statement from the company, which has become the poster child for troubles in China’s giant property market.

Evergrande confirmed late on Monday that on Dec. 30 authorities in Danzhou city, Hainan province, had ordered it to demolish 39 buildings at Ocean Flower Island, a massive integrated resort development where Evergrande has spent 81 billion yuan ($13 billion) to build over 60,000 homes.

It did not disclose the reason for the demolition order and Reuters could not reach Hainan provincial authorities for comment.

Local media, citing a screenshot of the official order, reported prior to Evergrande’s confirmation on the demolition that the buildings needed to be demolished within 10 days for illegal construction and environmental violations.

The order did not involve other plots of land in the project, Evergrande said on Tuesday.

“The company will actively communicate with the authority in accordance with the guidance of the decision letter and resolve the issue properly,” it added in the filing.

On its liquidity status in general, the firm said it would continue to actively maintain communication with creditors.

With Evergrande finding it tough to pay its suppliers and contractors due to the liquidity squeeze, some of its projects were halted. But the company said last week 91.7% of its projects nationwide had resumed construction, and over 100 developments totalling 39,000 units would complete building in December.

J.P. Morgan said in a report early this week that most developers had missed their 2021 sales targets, although sales still managed average growth of 3% on-year.

The investment bank expected yearly sales growth to continue to shrink in the first quarter due to a very high base and weak market sentiment.

($1 = 6.3717 Chinese yuan renminbi)

(Reporting by Clare Jim; Editing by Stephen Coates and Muralikumar Anantharaman)