The president of the Evergrande group, one of the largest construction companies in China, whose collapse marked the beginning of the crisis in the country’s real estate sector, is under house arrest, the financial information agency Bloomberg reported this Wednesday.
According to the agency, citing anonymous sources, billionaire Xu Jiayin (also known by his Cantonese name Hui Ka Yan) was detained earlier this month by authorities.
Evergrande has not yet reacted to the information.
In mid-September, the group announced the arrest of employees of one of its subsidiaries, without specifying the charges. According to the Chinese economic information magazine Caixin, two former Evergrande executives were also arrested.
The real estate sector in China has experienced meteoric growth in recent decades, in a country where the sale of properties before even the start of construction allows other projects to be financed.
The financial situation of many Chinese construction companies deteriorated after Chinese regulators began requiring companies in 2020 to have a 70% ceiling on the ratio of liabilities to assets and a 100% limit on net debt over the year. capital, which triggered a liquidity crisis. in the sector, which was aggravated by measures to combat the Covid-19 pandemic.
The collapse of Evergrande, whose liabilities amount to 328 billion dollars (307 billion euros), is the most emblematic case of this crisis, which has strong implications for the country’s middle class. Faced with a small capital market, the sector concentrates a large part of the wealth of Chinese families: around 70%, according to different estimates.
In recent months, the crisis has affected another heavyweight in the sector: Country Garden, until recently considered a financially solid company.
On Monday, a subsidiary of Evergrande announced that it could not pay the coupon on the bonds, increasing pressure on the group, ahead of a hearing scheduled for the end of October with a group of creditors, in Hong Kong courts.
Source: TSF
