A criminal investigation has been launched into the actions of the founder of the Chinese company Evergrande. It does not bode well for the real estate developer suffering from a debt burden of hundreds of billions.
BEIJING The shares of Evergrande, one of the most indebted companies in the world, have not been traded on Asian stock exchanges this week.
The sale of the Chinese real estate developer’s shares was stopped last week after rumors about the company’s founder and its current chairman of the board From Hui Ka Yan began to spread.
According to rumors, the billionaire, who canceled his public appearances unexpectedly and without explanation, had come under police surveillance.
Struggling in huge financial difficulties Evergrande confirmed the rumors at the end of the week. It issued a statement saying that Hui is suspected of having committed a crime.
The company did not say in more detail what kind of crime the founder is suspected of, nor whether the 64-year-old Hui is still in charge of the company or not. The secrecy drove Evergrande’s share price into a downward spiral.
According to the Wall Street Journal the doubts are related to the company’s international money transfers.
Evergrande has been fighting bankruptcy for a couple of years now. The company returned to the stock exchanges after a year and a half break in September, when it got into a Chapter 15 debt settlement in the United States.
Chapter 15 is the last straw under US law for a struggling multinational company. By filing bankruptcy in the United States, a company can protect itself for a while from its creditors in other countries as well, because it is protected by American law.
Evergrande’s rescue attempt is one of the largest in the world’s financial history. The company has an estimated $300 billion in debt.
Even the danger of another financial crisis?
The construction and real estate sector, in which Evergrande has been the most important player, is responsible for about a quarter of China’s gross domestic product. The fate of Evergrande thus affects the entire economy of China.
However, Asian economic experts have different views on how violently a real estate company can destabilize the country. In the most gloomy estimates, the collapse of Evergrande could collapse the Chinese economy and cause an international financial crisis.
The size of the Chinese economy quintupled between 2001 and 2021. The engine of the tremendous growth was the construction industry.
Momentum blindness struck: Evergrande and other leading real estate developers took on debt recklessly. Many of them have already filed for bankruptcy.
Corruption and secret relationships
The disappearance of high-ranking politicians and business leaders from the limelight immediately starts a rumor mill in China about the possible ouster and arrest of the leader.
The rumor mill is fueled by the fact that The Chinese police and mainstream media do not report on the situation of the missing person other than with official announcements and often only after a long time.
In addition to Hui, there are currently two ministers in Hävyks.
Ex-Foreign Minister Qin Gang has not been seen in public since June 25th. First it was hinted that he would have health concerns. According to other rumors, he had a secret affair with a TV reporter.
At the end of July, it was reported that Gang has moved on to other positions and has been appointed as China’s foreign minister Wang Yi.
Minister of Defense About Li Shangfu has not heard since August 29th. According to American information, he would have been placed under house arrest.
The Chinese government has not confirmed media reportsaccording to which Li would be the subject of a corruption investigation, like the industry minister who unexpectedly disappeared from public view in July of last year Qiao Yaqing.
The subject can be discussed until Wednesday, October 4 at 11 p.m.