China Evergrande Group‘s billionaire chairman has been placed under police surveillance, sources with knowledge of the situation disclosed. Earlier this month Hui Ka Yan was escorted by Chinese law enforcement and is currently under observation at an undisclosed location. The reasons for the residential surveillance, which is not tantamount to formal detention or arrest, remain unclear.
Under China’s Criminal Procedure Law, this action restricts Hui’s movement and his ability to interact or communicate with others without official permission. It necessitates the surrender of passports and identification cards to the police, with the procedure not exceeding six months, as per the law.
This development marks a turning point in the ongoing crisis at the world’s most heavily indebted developer, bringing the criminal justice system into the picture.
Earlier this month, the authorities detained some employees of Evergrande’s wealth management unit, and two former executives were reportedly held. This event has raised uncertainties about Evergrande’s future, particularly as its restructuring plan recently faced setbacks, shaking financial markets and heightening the risk of liquidation.
For Hui, this is yet another setback in a dramatic downfall. Once a highly politically connected businessman with interests spanning from electric vehicles to football, Hui has now become the most prominent victim of President Xi Jinping’s clampdown on excessive leverage and real estate speculation.
Evergrande lies at the heart of a prolonged property crisis that has adversely impacted the Chinese economy and severely undermined confidence in the housing market. The developer announced last Friday that it had cancelled significant creditor meetings and must reconsider its offshore debt restructuring plan.
Rise and fall
Hui, who rose from humble beginnings as the son of a woodcutter, established Evergrande as China’s leading developer, aggressively using leverage to acquire vast plots of land and competitor companies. His ventures extended beyond property development into industries such as bottled water, professional football, and electric vehicles.
Once Asia’s second-richest individual, Hui’s net worth plummeted as his property empire collapsed. From US$42 billion in 2017, Hui’s net worth is now estimated at around US$1.8 billion, according to the Bloomberg Billionaires Index. Evergrande currently holds 2.39 trillion yuan (US$327 billion) in liabilities.
In 2021, Evergrande officially defaulted, causing authorities from its home province of Guangdong to helm what is set to be one of the country’s largest debt restructurings.
Hui’s standing in the Chinese People’s Political Consultative Conference, an influential group comprising government officials and the biggest names in business, has been compromised as his property group has become the largest casualty of the nation’s credit crunch.
The Chinese central bank attributed Evergrande’s downfall to its “own poor management” and “reckless expansion,” and the government urged Hui to utilise his fortune to help repay investors, reported Bangkok Post.
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