China to ban Evergrande chair from securities market for life

BEIJING — Chinese regulators will ban the chairman of property giant Evergrande from the securities market for life on grounds of financial fraud, a subsidiary of the company said Monday.

Heavily indebted Evergrande has become a potent symbol of the years-long crisis in China’s property market, a crucial pillar of growth in the world’s second-largest economy.

The company has struggled to repay creditors for years, defaulting in 2021 and becoming subject to a winding-up order by a Hong Kong court earlier this year.

On Monday, its flagship unit Hengda Real Estate said in a filing to the Shenzhen stock exchange that it had received an “advance notice” from the China Securities Regulatory Commission (CSRC) regarding “administrative penalties and market bans targeting… illegal and illicit behaviors”.

The CSRC plans to rule in favor of a lifetime ban for Evergrande chairman Xu Jiayin, the filing said.

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The regulator is set to conclude that Xu, also known by his Cantonese name Hui Ka Yan, “made decisions and organized the implementation of financial fraud, using particularly egregious means and under particularly serious circumstances”.

Xu is already under criminal investigation in mainland China.

He will be fined 47 million yuan ($6.5 million), according to the statement, and Hengda itself will “be ordered to make corrections and be issued with a warning as well as a fine of 4.175 billion yuan ($580 million)”.

Former Evergrande CEO Xia Haijun will also be given a lifetime securities market ban and fined a total of 15 million yuan for helping to prepare false financial reports, the filing said.

Slow-motion crisis

Evergrande was once China’s biggest real estate firm, a titan in a sector that ballooned as property became the cornerstone of a burgeoning middle class’s growing wealth.

But it accumulated massive loans at a time when credit flowed freely, and was left owing more than $300 billion after Beijing turned off the taps to rein in the sector in 2020.

READ: Embattled China Evergrande ordered to liquidate by Hong Kong court

Unable to repay interest on its loans, the company formally defaulted the following year, sending shockwaves through the industry.

In January, a court in the semi-autonomous city of Hong Kong issued a winding-up order for Evergrande, ruling that the company had failed to come up with a debt repayment plan that suited its creditors.

Evergrande has insisted that its operations in the mainland will be unaffected by the decision, and analysts have cautioned that its creditors are unlikely to get repaid in full.

Several other Chinese real estate firms have crumpled under massive debts in recent years, prompting Beijing to issue several rounds of bailout funds for the embattled sector.

The government provided nearly 10 trillion yuan in loans to the property sector last year, though analysts warn the crisis is far from over.

It is one of several major headaches afflicting Chinese policymakers, with the economy also suffering from chronic low consumption, high youth unemployment and a rapidly ageing population.