Report: China's Evergrande Founder Under Police Surveillance

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Facts

• Bloomberg News reported Wednesday — citing unnamed sources familiar with the matter — that Hui Ka Yan, the billionaire chair of China's Evergrande Group, has been put under police control in his home country.¹
• He was allegedly taken away earlier this month and put under so-called residential surveillance — a police action that falls short of formal detention and doesn't imply criminal charges — for reasons that remain unclear.²
• This comes as the Chinese property developer has become entangled with the criminal justice system, with some staff in its wealth management unit and two of its former executives having recently been detained.³
• Shares of the Evergrande Group crashed again on Wednesday, taking losses to 42% this week amid mounting fears of a potential liquidation of the company that has lost 99.9% of its value since peaking in October 2017.⁴
• Hong Kong-listed shares of the developer and those of its property-services unit and electric-vehicle manufacturing business were suspended from trading on Thursday.⁵
• At the center of an unprecedented liquidity crisis in China's real estate sector — which accounts for roughly a quarter of the country's economy — Evergrande Group is the world's most indebted developer, possessing more than $300B in total liabilities.⁶

Sources: ¹Forbes, ²Bloomberg, ³Guardian, ⁴CNN, ⁵Wall Street Journal and ⁶Reuters.

Narratives

• Anti-China narrative, as provided by CNBC. This report raises doubts about the future of the highly indebted Chinese property developer as fears of its collapse grow. With Hui's freedoms limited, the company may not survive long if the refinancing channel remains shut for a prolonged period. A failed Evergrande could spill over into other parts of the economy, leading to China's own Lehman-style crisis.
• Pro-China narrative, as provided by Global times. While Western media keeps trying to promote Evergrande's case as if its potential collapse would negatively affect China's economic prospects, the fact is that such claims expose just how little they understand the Chinese development model. As Evergrande has engendered this crisis by not following Beijing's directions, the group must shoulder its responsibility without a bailout.

Predictions