The Chairman of the Evergrande Group, one of China’s largest construction companies, whose collapse marked the beginning of the country’s real estate crisis, is under house arrest, financial information agency Bloomberg reported on Wednesday.
According to the agency, citing unnamed sources, billionaire Xu Jiayin (also known by his Cantonese name Hui Ka Yan) was arrested by authorities earlier this month.
Evergrande has not yet responded to the information.
In mid-September, the group announced the arrest of employees of one of its subsidiaries, without specifying the charges. Two former Evergrande executives were also arrested, according to Chinese economic information magazine Caixin.
China’s real estate sector has experienced rapid growth in recent decades, in a country where selling properties before construction even begins makes it possible to finance other projects.
The financial situation of many Chinese construction companies deteriorated after Chinese regulators in 2020 began requiring companies to impose a 70% ceiling on the liability-to-asset ratio and a 100% limit on net debt over equity, leading to a liquidity crisis. in the sector, which was exacerbated by the measures to combat the Covid-19 pandemic.
The collapse of Evergrande, whose debts amount to 328 billion dollars (307 billion euros), is the most emblematic example of this crisis, which has strong consequences for the country’s middle class. Faced with a small capital market, the sector concentrates much of the wealth of Chinese families — about 70%, according to various estimates.
In recent months, the crisis has hit another industry heavyweight: Country Garden, until recently seen as a financially solid company.
On Monday, an Evergrande subsidiary announced it could not pay its bond coupon, increasing pressure on the group ahead of a hearing scheduled for late October with a group of creditors in Hong Kong courts.
Source: DN
