Hui Ka Yan, the billionaire chairman of the embattled property developer China Evergrande Group, has reportedly been placed under police control. This revelation comes from individuals familiar with the situation who preferred to remain anonymous due to the sensitive nature of the matter.
Hui's apprehension by Chinese police occurred earlier this month, and he is currently under constant surveillance at a designated location. The exact reasons behind Hui's placement under what is known as "residential surveillance" remain unclear. This form of police action falls short of formal detention or arrest and does not necessarily imply that Hui will face criminal charges.
However, it does entail severe restrictions on his personal freedom, preventing him from leaving the specified location or engaging with others without prior authorization, in accordance with China's Criminal Procedure Law. Hui has also had to surrender his passports and identification cards as part of this process. Importantly, this measure is not supposed to extend beyond six months, per the law.
This development marks the latest twist in the ongoing saga involving the world's most heavily indebted real estate developer. It signifies a shift toward involvement with the criminal justice system, following earlier detentions of some staff members within Evergrande's wealth management unit and reports of former executives being held.
These developments have raised pressing questions about Evergrande's future, especially in the wake of recent setbacks to its restructuring plan, which have roiled financial markets and increased the specter of potential liquidation.
Hui Ka Yan, who once held one of the world's largest fortunes during Evergrande's share price peak in 2017, has suffered yet another setback in his dramatic fall from grace. Once regarded as one of China's most politically influential business figures, with aspirations spanning electric vehicles to soccer, Hui now stands as the most prominent casualty of President Xi Jinping's crackdown on excessive leverage and speculation within the real estate sector. Both Guangdong police and Evergrande have refrained from providing comments regarding this matter.
Evergrande finds itself at the epicenter of a prolonged property crisis that has cast a shadow over the Chinese economy and eroded confidence in the real estate market. Recently, the developer announced the cancellation of pivotal creditor meetings and the necessity to revisit its offshore debt restructuring plan. Subsequently, it admitted to failing to meet regulatory requirements for issuing new bonds, a crucial component of the debt overhaul. Meanwhile, its mainland unit faltered in repaying an onshore bond.
A Bloomberg Intelligence index tracking Chinese developer stocks descended to its lowest level since November on a Wednesday morning. Homebuyer sentiment remains fragile as the upcoming holiday sales season looms, serving as a litmus test for the effectiveness of recent stimulus measures.
At one point, he held the title of Asia's second-richest individual, only to witness his net worth plummet as his property empire crumbled. Hui's current net worth is estimated at approximately $1.8 billion, a substantial decline from $42 billion in 2017, as reported by the Bloomberg Billionaires Index. Notably, Evergrande grapples with a staggering 2.39 trillion yuan (equivalent to $327 billion) in liabilities.
The 64-year-old entrepreneur has been a member of the Communist Party for over three decades. In 2008, he earned a position within the Chinese People's Political Consultative Conference, an exclusive group that encompasses government officials and influential business figures. He subsequently secured two additional five-year terms.
However, events took a turn for the worse in 2021 when Evergrande officially entered into a state of default. Authorities from its home province of Guangdong initiated what is anticipated to become one of China's most substantial debt restructurings.
The Central Bank of China attributed Evergrande's downfall to its "own poor management" and "reckless expansion." The government, in turn, has implored Hui to utilize his wealth to assist in repaying investors.
Image source: Bloomberg