Chinese developer Evergrande Real Estate Group announced that its chairman, Hui Ka Yan, has been placed under “mandatory measures” due to suspicion of involvement in “illegal crimes.” The company did not provide further details regarding the measures or the alleged crimes. This news comes almost two years after Evergrande’s default, which caused global market instability. Bloomberg had reported earlier that Hui had been taken away by Chinese police and put under residential surveillance. Evergrande has been in talks with international creditors for a restructuring agreement, but the recent official investigation prevented the company from issuing new notes, derailing the plan.
Beijing has been struggling to alleviate the cash crunch in its property sector that has been weighing on the country’s economy. Other developers like Country Garden have come close to default, and there have been signs of spillover effects at investment firm Zhongrong. Hui, who was once Asia’s richest man, has seen his wealth decline and has faced pressure to personally support his financially distressed company. The Chinese government has refrained from bailing out indebted developers and has focused on completing unfinished construction projects. However, in recent months, policymakers have taken a more supportive approach due to the sustained weakness in the property market, which is a significant contributor to economic activity.
The situation at Evergrande reflects the array of economic challenges faced by President Xi Jinping’s government, including declining exports and a lackluster rebound after the lifting of zero-Covid policies earlier this year. In addition to the investigation against Hui, police in Shenzhen detained some employees from Evergrande’s wealth management unit. The unit had borrowed from retail investors, and Evergrande stated that some staff had been subjected to “criminal coercive measures.” Overall, the developments surrounding Evergrande and its chairman indicate the intensifying government pressure on the company and the continuing struggles in China’s property market.