The troubled property giant faces more woes as its founder is reportedly detained
Shares in the crisis-hit Chinese property giant Evergrande have been suspended in Hong Kong amid reports that its chairman and founder, Hui Ka Yan, has been placed under police surveillance. It follows reports earlier this week that other current and former executives had also been detained by Chinese authorities. Thursday’s market statement did not give a reason for the trading halt, but it marks another low for the heavily indebted property giant which defaulted in 2021, triggering China’s current real estate market crisis.
Evergrande, once valued as the world’s most valuable property developer, has been struggling to make payments on its over $300bn of liabilities and missed a crucial repayment deadline on its offshore debt in December. Its shares have fallen by more than 75% over the last year in Hong Kong and have been suspended from trading for months. Most of Evergrande’s debt is owed to people within China, many of whom are ordinary citizens whose homes have not been finished. When the firm defaulted on its huge debts in 2021, it sent shockwaves through global financial markets as the property sector contributes to roughly a quarter of China’s economy.
The firm’s latest plan to restructure its debt faces uncertainty
In August, the firm filed for bankruptcy in New York, in a bid to protect its US assets as it worked on a multi-billion dollar deal with creditors. Its latest plan was to reissue its overseas debt as new bonds that it had to pay back in about 10 years’ time, as well as offering their creditors stakes in the company as shares. But earlier this week, Evergrande revealed its mainland unit Hengda Real Estate had defaulted on 4 billion yuan (£449m; $547m) of debt. Chinese business wire Caixin also reported that several current and former executives had been detained.
Then on Wednesday, Bloomberg News reported that Hui Ka Yan, who is also known as Xu Jiayin, had been taken away by police this month and was being monitored at a designated location. The BBC has been unable to independently confirm Bloomberg’s reporting. Trading in its two other units – the property services and electric vehicle – was also suspended on Thursday. “China’s property-sector stress will continue to pose cross-sector credit risks in the near term,” wrote Lan Wang and Duncan Innes-Ker of Fitch Ratings.
The fate of Evergrande and its chairman remains unclear
Evergrande, which was founded by Hui in 1996, grew rapidly by borrowing heavily and expanding into various sectors, including electric vehicles, sports, media and tourism. Hui, who was once China’s richest man, has a net worth of $8.4bn, according to Forbes. He is known for his lavish lifestyle and philanthropy, as well as his close ties to the Chinese Communist Party. However, his fortunes have changed dramatically since the Chinese government introduced new rules to curb the excessive borrowing of property developers in 2020, known as the “three red lines”.
Evergrande has been unable to meet the requirements of the new regulations, and has been facing mounting pressure from regulators, creditors and protesters. The company has repeatedly denied rumours of bankruptcy and insisted that it has enough assets to cover its liabilities. However, analysts have warned that the firm’s collapse could have a systemic impact on China’s financial system and economy, as well as spillover effects on global markets. The fate of Evergrande and its chairman remains unclear, as the Chinese authorities have not commented publicly on the situation.