Breaking News: Evergrande Chairman Hui Ka Yan Detained in Shenzhen Amid Property Sector Crisis
By Clare Jim and Julie Zhu
HONG KONG (Multibagger) - In a significant development for the embattled Chinese property market, Hui Ka Yan, the chairman of China Evergrande Group, has been relocated to a special detention centre in Shenzhen, according to two sources familiar with the matter.
Hui, 65, has remained out of the public eye since his detention by Chinese authorities last year. His current location had not been disclosed until now.
Financial Misconduct and Legal Repercussions
In March, China's securities regulator found that Evergrande's flagship unit had grossly inflated earnings and committed securities fraud. Consequently, Hui was fined $6.6 million and barred from the securities market for life. Evergrande was also ordered into liquidation earlier this year.
Despite these severe penalties, Hui has not been formally charged with any crimes. It remains unclear how long he will stay in detention or if he will eventually face trial.
The detention of prominent business figures in China is not uncommon, with some remaining in custody for years without clear information about their status.
Strategic Relocation to Shenzhen
Initially placed under house surveillance in Beijing, Hui was moved to Shenzhen several months ago. This move was reportedly to facilitate easier communication with top Evergrande executives. Evergrande's headquarters are in Guangzhou, a neighboring city, and its wealth management unit operates out of Shenzhen.
Requests for comments from China's Ministry of Public Security, Shenzhen's municipal government, Hengda Real Estate (Evergrande's main unit), and Evergrande's liquidators have gone unanswered.
The Rise and Fall of Evergrande
Founded by Hui in 1996, Evergrande quickly became China's largest property developer by contracted sales, largely due to its aggressive debt accumulation. However, since 2021, the company has defaulted on most of its $300 billion liabilities, including billions owed to wealth management product investors. The company's financial woes have significantly impacted China's property sector and broader economic growth.
Earlier this year, a regulatory probe revealed that Evergrande had inflated its revenue by 564 billion yuan ($79 billion) between 2019 and 2020 and issued bonds based on these falsified statements.
Hui's Current Status and Evergrande's Efforts
Hui is reported to be in "good shape" and has access to medical care and good food at the special detention centre. These centres typically offer better conditions compared to ordinary detention facilities.
In a letter to senior Evergrande executives, Hui urged them to resolve the issue of unpaid returns to investors in its wealth management products as soon as possible. Evergrande's wealth management unit had announced plans to repay investors in late 2021 but halted monthly installments by August last year. Subsequently, several staff members from the unit were detained by Shenzhen police.
Despite these challenges, Evergrande is reportedly close to delivering most of the homes promised to buyers, with more than 70% of construction completed for these projects. However, specific numbers were not disclosed. As of 2022, Evergrande had nearly 800 projects across China.
Analysis
Breaking it Down:
- Who? Hui Ka Yan, Chairman of China Evergrande Group
- What? Detained in Shenzhen amid Evergrande's financial crisis
- Why? Regulatory findings of inflated earnings and securities fraud
- Impact: Hui fined $6.6 million, barred for life from the securities market, and Evergrande ordered into liquidation
How does it affect you?
If you are an investor in Evergrande or the broader Chinese property market, this news is crucial. Evergrande's financial instability has been a significant drag on China's economic growth. The company's ability to deliver on its housing projects and repay its massive debt will impact market confidence and economic stability.
For those holding wealth management products with Evergrande, the company's ongoing efforts to repay investors are critical. However, the uncertainty surrounding Hui's detention and the company's future could mean prolonged financial distress.
Invest wisely and stay informed about developments in China's property sector, as these events can have far-reaching consequences on global markets and individual investments.