China Evergrande's Chairman under police surveillance as liquidation risk grows
China Evergrande Group's Chairman, Hui Ka Yan, has reportedly been placed under police surveillance, marking a new phase in the ongoing saga of the world's most indebted property developer. Yan's residential surveillance does not necessarily indicate an arrest or formal detention, but it highlights the increasing involvement of the criminal justice system in the Evergrande crisis.
Yan's fall from political grace
Once considered among China's most politically connected businessmen, Yan now finds himself under police control. The billionaire's ambitions ranged from electric cars to soccer, but he has become the most high-profile casualty of President Xi Jinping's crackdown on excessive leverage and speculation in the real estate sector.
Evergrande crisis has shaken China's property sector
Evergrande is at the center of a crisis in China's property sector, as the world's most indebted developer struggles to repay its debts. The company recently announced it could not issue new bonds for its offshore debt restructuring plans due to a regulatory investigation into its main Chinese unit, Hengda Real Estate. This has led to a series of debt defaults and has impacted the growth of the world's second-largest economy.
Offshore creditors threaten Evergrande liquidation
Some of Evergrande's offshore creditors are planning to join a liquidation court petition against the company if it does not submit a new debt revamp plan by the end of October. It couldn't satisfy the regulatory requirements necessary for issuing new bonds, which are a crucial part of the debt restructuring process. The company's mainland unit also failed to repay an onshore bond, forcing Evergrande to revisit its plan to restructure its offshore debt.
China is urging Yan to use his fortune to repay
China's central bank attributes Evergrande's downfall to the company's poor management and reckless expansion. The government is urging Yan, who was once Asia's second-richest person but now has a net worth of about $1.8 billion, down from $42 billion in 2017, to use his fortune to assist in repaying investors. Evergrande is burdened with 2.39 trillion yuan (nearly Rs. 27 lakh crore) in liabilities.
