China Evergrande Group announced on Thursday that its chairman and founder has been suspected of committing crimes, confirming reports that Hui Ka Yan was under police surveillance.
It stated that “relevant authorities” notified the company that Mr. Hui, also known as Xu Jiayin, is subject to “mandatory measures in accordance with the law due to suspicion of illegal crimes.”
Bloomberg had earlier reported that Mr. Hui was taken away by the police to be monitored at a surveilled location, but there was no confirmation of an arrest or criminal charges. Similar reports were made in Chinese media, also citing anonymous sources. Evergrande stock plummeted on Wednesday when the reports surfaced. Prior to that, several rumors about Mr. Hui had emerged in Chinese media, suspecting that he had divorced his wife and committed suicide.
Under its own laws, the Chinese regime can detain anyone in its designated secret facilities for up to half a year. The mandatory measures referenced in the company’s statement can mean anything from detention to formal arrest.
Trading of Evergrande stock and two of its Hong Kong-listed units had been abruptly suspended on Thursday without explanation amid growing concerns for the company’s future. It was just the latest in a long saga of turmoil for the embattled real estate developer, once the second largest in China.
Before its suspension, stocks had fallen nearly 90 percent since it resumed trading in August after it had previously been suspended for 17 months.
Evergrande reported billions in losses in 2021, as it became the world’s most indebted property developer.
It now holds $328 billion in liabilities, according to a public statement the company made in July, and had been working with creditors to try to get approval to restructure its offshore debt. However, investigations into the company have prevented its restructuring plans. On Aug. 17, it filed for bankruptcy in New York, shielding itself from restructuring by its creditors.
Once China’s wealthiest man, Mr. Hui’s net worth has dropped by at least 90 percent.
In July, Evergrande’s chief executive officer and chief financial officer resigned after an investigation found that $2 billion of the company’s money was improperly rerouted as collateral for several loans.
In August, the company announced it was being investigated by China’s Securities and Futures Commission.
Earlier this month, Chinese police detained members of Evergrande’s financial staff and launched a criminal investigation, according to a statement released by the company. A government statement explained that the staff members had been detained for “illegal fundraising.”
“According to the current public information, Evergrande Wealth and its related parties illegally collected funds to form an internal fund pool, violated the contract, and mismatched product investment directions and deadlines, causing losses to investors,” it stated, adding that the detention would have “a positive significance in regulating and stabilizing the financial market.”
According to some experts, the probe into Evergrande may be tied to Chinese leader Xi Jinping’s purge of his political rivals.
Tang Jingyuan, a China affairs commentator and Epoch Times contributor, said on Sept. 7 that Evergrande’s exponential rise in the past two decades could not have come without a “strong backer” providing benefits, financing, “a lot of convenience,” and political safety. Otherwise, private enterprises are “strangled” under the Chinese Communist Party’s (CCP) economic system, he explained.
Experts believe this backer to be former Vice President Zeng Qinghong, an influential official whose family members include veteran revolutionaries and senior CCP cadres. He belonged to former CCP leader Jiang Zemin’s faction, and his power and influence brought his family great wealth and a vast array of properties in real estate, banking, technology, and propaganda. When Xi Jinping became head of the CCP in 2012, Mr. Zeng was part of the faction that criticized the new leader’s policies, which made him a target of the “anti-corruption” campaign. Experts previously told The Epoch Times that Mr. Xi’s targeting of the real estate industry is part of his effort to crush Mr. Zeng.
Mr. Xi’s crackdown on the property market began in 2016, tightening lending standards and putting hundreds of companies into bankruptcy. Despite this, Evergrande’s Mr. Hui continued to borrow heavily, expanding the debt load. In 2020, more regulations were put forth, and the company could no longer borrow—it was trapped with its debt load.
According to some financial experts and China observers, Evergrande’s troubles have come to represent China’s real estate sector as the industry bubble has burst.
From The Epoch Times