Hui Ka Yan, the billionaire founder and chairman of China Evergrande Group, has been placed under police control, according to people familiar with the matter. Hui, who is also known as Xu Jiayin in Mandarin, was taken away by authorities earlier this month and is being monitored at a designated location, the sources said. He has not been formally arrested or charged with any crime.
The move comes as Evergrande, the world’s most indebted property developer, faces a looming debt crisis that has rattled global markets and sparked protests by angry investors and homebuyers. Evergrande owes more than $300 billion to various creditors, suppliers and customers, and has been struggling to meet its interest payments and other obligations.
Why did the police detain Hui?
The exact reason for Hui’s detention is unclear, but it could be related to the investigation into Evergrande’s wealth management arm, which has been accused of illegal fundraising and fraud. Police in Shenzhen, where Evergrande is based, said on Saturday that they had detained some staff of the unit and urged investors to provide leads and file complaints online.
Evergrande’s wealth management business, established in 2015, sold high-yield products to retail investors, promising returns of up to 12%. However, the company failed to pay back about 40 billion yuan ($5.6 billion) of these products in 2021, triggering nationwide demonstrations and putting pressure on Beijing to find a solution to avoid further unrest.
How did Hui build Evergrande?
Hui, 63, is one of China’s richest and most influential businessmen, with a net worth of about $8.4 billion, according to the Bloomberg Billionaires Index. He started his career as a technician in a steel factory and later became a property tycoon, founding Evergrande in 1996.
Under Hui’s leadership, Evergrande expanded rapidly across China, building sprawling residential complexes, shopping malls, stadiums and theme parks. The company also diversified into other sectors, such as electric vehicles, health care, sports and entertainment. Hui was known for his aggressive and ambitious style, borrowing heavily to fund his expansion and rewarding his loyal employees with lavish bonuses and gifts.
What is the impact of Evergrande’s crisis?
Evergrande’s crisis has raised fears of a contagion effect on China’s financial system and economy, as well as the global markets. The company’s bonds and shares have plunged in value, and some of its creditors and suppliers have demanded immediate repayment or seized its assets. Many of its homebuyers have also demanded refunds or delivery of their unfinished properties, some of which have been delayed for years.
The Chinese government has been closely monitoring the situation and has reportedly urged Evergrande to resolve its debt problems and ensure social stability. However, it has also signaled that it will not bail out the company, and that it expects other developers and local authorities to share the responsibility of dealing with the fallout. Analysts have said that the government is likely to intervene only if the crisis poses a systemic risk or threatens social order.
What is the outlook for Evergrande and Hui?
The outlook for Evergrande and Hui remains uncertain, as the company faces a series of deadlines and legal challenges in the coming weeks and months. Evergrande has said that it is in talks with some of its bondholders and other creditors to negotiate a restructuring plan, and that it is trying to sell some of its assets to raise cash. However, it has also warned that there is no guarantee that it will be able to meet its obligations, and that it may face cross-defaults and litigation.
As for Hui, his fate depends on the outcome of the police investigation and the government’s attitude. He could face criminal charges, fines, or even imprisonment if he is found guilty of any wrongdoing. He could also lose his control or ownership of Evergrande, or be forced to step down from his position. Alternatively, he could be released or cleared of any suspicion, and be allowed to continue to run his business, albeit under more scrutiny and regulation.