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Evergrande, blamed for the downfall of the real estate market and effectively causing China’s economic slump, appears to be facing de facto bankruptcy after receiving various dispositions from the authorities recently. It’s safe to say there’s almost no chance of recovery.
According to reports on the 19th by Beijing Youth Daily and other media, the punitive measures imposed by China’s securities regulator, the Securities Regulatory Commission, on Evergrande officials, including founder Xu Jiayin (65), are not few. Among them is the lifetime ban imposed on founder Xu from entering the stock market, effectively rendering him financially incompetent.
The imposition of a 47 million yuan fine should also be mentioned, which, though not a large amount for him, carries significant symbolic meaning. His right-hand man, former CEO Xia Haijun, also faced sanctions, including an order to pay a fine of 15 million yuan.
Moreover, the Securities Regulatory Commission also ordered Xu not to indulge in a luxury lifestyle again. Officially, he was accused of committing accounting fraud by inflating sales figures for 2019 and 2020, but it seems more like a punishment for ruining the real estate market. The Commission’s announcement that “Xu Jiayin decided and organized financial manipulations. The means were particularly vile, and the circumstances particularly grave” indicates this sentiment.
The corporate entity has to pay a massive price for committing accounting fraud, with a fine of 41.75 billion yuan. Given its current position on the brink of default, this presents a particularly challenging situation, with seemingly no ability to pay the fine. Considering that the market capitalization of the Hong Kong stock exchange is around 2.2 billion yuan, this seems plausible.
Evergrande was founded by Xu Jiayin in 1996 in Guangzhou, Guangdong, and grew into a conglomerate through its real estate business. However, its expansion into various business sectors, aggressive acquisitions and mergers, and reckless investment in new businesses backfired, leading to a debt crisis. As of March this year, its officially confirmed debt is estimated to reach 443 trillion yuan, with the potential for more if hidden debts are included. It’s in a situation where it could declare bankruptcy multiple times.
It would be odd if Xu Jiayin were unscathed. He was detained last September and is currently being investigated by the authorities. Some speculate that he could even face the death penalty through trial. The company’s bankruptcy and losing his fortune are not his only problems. If he’s not careful, he could indeed end tragically, leaving his glamorous past behind.
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