Evergrande Real Estate Group, the Chinese developer that triggered a property crisis in 2021 when it defaulted on its debts, announced that its chair, Hui Ka Yan, has been placed under “mandatory measures” on suspicion of involvement in “illegal crimes”. The company did not provide further details regarding the measures or the alleged crimes. This comes as Evergrande has been working towards a restructuring agreement with international creditors, but an official investigation is now preventing the company from issuing new notes, hindering the restructuring plan.
The timing of the investigation is significant, as Beijing is grappling with a cash crunch in China’s property sector, which is vital to the country’s economy. Other developers, such as Country Garden, have also come close to defaulting, indicating the spillover effects of the crisis. Hui Ka Yan, who was once Asia’s richest man, has seen his wealth plummet and has been under pressure to personally support his cash-strapped company. He was excluded from the Chinese People’s Political Consultative Conference last year, suggesting a loss of political favor.
While Beijing has chosen not to bail out Evergrande and other indebted developers, the government has focused on ensuring the completion of unfinished construction projects. However, policymakers have recently taken a more supportive approach due to the continued weakness in the property market, which typically accounts for a significant portion of economic activity. These challenges, along with declining exports and a slow economic rebound from the lifting of Covid-19 restrictions, add to the array of difficulties facing President Xi Jinping’s government.