Evergrande, accused of inflating revenues, faces heavy fines and penalties
Chinese real estate behemoth Evergrande and its founder, Hui Ka Yan, are embroiled in allegations of revenue inflation totaling $78 billion over a two-year period preceding the firm’s default on its debts.
The country’s financial regulator imposed a staggering fine of $583.5 million on Evergrande’s mainland subsidiary, Hengda Real Estate, while also considering a lifetime ban for Mr. Hui from China’s financial markets.
In a damning indictment, the China Securities Regulatory Commission (CSRC) attributed much of the wrongdoing to Mr. Hui, formerly China’s wealthiest individual, alleging that he directed staff to artificially boost Hengda’s financial results in 2019 and 2020.
Mr. Hui himself faces a substantial fine of $6.5 million, as disclosed in a filing by Evergrande to the Shenzhen and Shanghai stock exchanges.
Last September, Mr. Hui, who also serves as the company’s chairman, came under police scrutiny amid investigations into suspected illegal activities.
These developments unfold in the wake of the CSRC’s recent pledge to intensify efforts against securities fraud, underscoring a commitment to safeguarding small investors with robust enforcement measures.
Evergrande’s woes have epitomised China’s real estate crisis, characterised by an overwhelming debt burden exceeding $300 billion.
With liquidators now tasked with assessing Evergrande’s financial landscape, potential restructuring avenues, including asset disposals, are being explored to facilitate debt repayment.
However, the Chinese government faces a delicate balancing act, reluctant to halt property projects amidst a burgeoning demand for homes from prospective buyers awaiting completion.
The ripple effects of China’s property market turmoil reverberate globally, given its significant contribution of around one-third to the world’s second-largest economy.
Since 2021, stringent regulatory measures aimed at curbing excessive borrowing by major real estate developers have exacerbated financial strains within the industry.
This tightening has seen several prominent property firms default on their obligations, further exacerbating market instability.
Official data released on Monday underscored the severity of the situation, with property investment plunging by 9% in January and February compared to the previous year.
Additionally, new construction starts plummeted by 30%, marking the sharpest decline in over a year and highlighting the sector’s profound challenges.
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