The billionaire founder of the Chinese Evergrande under police control

Evergrande, the Chinese construction and real estate company in debt crisis, faces administrative and judicial investigations, as well as payment difficulties.

Hui Ka Yan, the billionaire chairman of embattled property developer China Evergrande Group, has been placed under police control, according to people with knowledge of the matter.

It is unclear why Hui is in custody, according to sources who said Hui was detained by Chinese police earlier this month and monitored at a designated location, Bloomberg reported. Neither the police nor Evergrande responded to requests for comment.

This measure means that, according to China’s Criminal Procedure Code, a person cannot leave the premises, meet or communicate with other people without approval. According to the law, passports and identity cards must be handed over to the police, but the process cannot exceed six months.

The move is the latest sign that the world’s most indebted property developer has entered a new phase. The development has raised questions about the fate of Evergrande after recent setbacks in its restructuring plan have rattled financial markets and raised the risk of liquidation.

WHO IS HUI KA YAN?

The son of a logger who grew up poor, Hui built Evergrande into China’s biggest developer, buying up huge tracts of land before expanding into industries ranging from bottled water to professional football and electric vehicles.

Hui, 64, has also been a member of the Communist Party for more than 30 years. In 2008, she attended the Chinese People’s Political Consultative Conference, an elite group of government officials and business leaders.

Things got worse in 2021, when Evergrande officially defaulted and authorities in its hometown of Guangdong spearheaded what was set to be one of the country’s largest debt restructurings.

The fortune of Hui, once Asia’s second-richest man, has also plummeted. Hui’s fortune fell from $42 billion to $1.8 billion in 2017, according to the Bloomberg Billionaires Index. Evergrande currently owes 2.39 trillion yuan ($327 billion).

In its notice to the Hong Kong Stock Exchange on September 24, Evergrande stated that the China Securities Regulatory Commission and the National Development and Reform Commission had imposed “administrative measures” on the plan drawn up by the company for the restructuring of Debt.

In addition, the company’s former chief executive officer (CEO), Şia Haycun, and former financial affairs coordinator (CFO), Pan Darong, are also detained.

Shia and Pan resigned in July due to the scandal that emerged in 2021, when it emerged that the group had directed bank deposits to its subsidiaries, which it provided as collateral to third parties for loans.

On the other hand, it was reported that Cu Cialin, former manager of the Evergrande group’s insurance company Hayat Teminat, was also arrested on September 17, and was transferred to the state on September 16.

CHINA HAS A DEBT OF 2 PERCENT OF ITS GDP

Evergrande’s total debt obligation, which reached 2.4 trillion yuan (about $330 billion) at the end of 2022, corresponds to about 2 percent of China’s gross domestic product (GDP).

The company is facing numerous lawsuits filed by creditors over its foreign debt of 12.6 billion yuan ($1.7 billion), which was in default because it could not pay it on time.

The company, whose payment difficulties have worsened due to the current stagnation of the real estate sector in China and the decline in home sales, canceled the six meetings scheduled with creditors on September 25 and 26 to discuss debt restructuring .

The reasons for the cancellations were “weaker than expected sales” and “the need to reassess restructuring conditions.”

If the company cannot reach an agreement with its creditors before the first hearing in Hong Kong on October 30, its assets could begin to be seized for its debts.