China’s securities regulator announced on Monday that it had banned the founder of real estate giant Evergrande from the stock market and charged the company with $78 billion in fraud.
Evergrande was once one of China’s largest and most trusted companies, fueling a boom in the real estate market that encouraged many middle-class Chinese to invest in new home construction. Evergrande and similar companies received the funds and never built these homes, claiming that “cash flow” issues made it impossible to finance construction.
As a result, homebuyers suspended mortgage payments in protest starting in 2022, and protests began to occur in some areas most affected by the real estate collapse, particularly in Henan province. There, angry investors have repeatedly stormed banks and demanded their investments back. . Sometime in September 2021, Evergrande investors got angry. A storm has come The company’s office is demanding a refund.
The failure of the real estate market, which has severely damaged China’s manufacturing and small business sectors as a result of brutal “zero corona” lockdown and quarantine camp policies, has damaged China’s economy and lured foreign investors to states such as India. I’m letting it go. China reported its first quarterly decline in foreign direct investment for the quarter ending September 2023.
Evergrande is believed to have more than $300 billion in debt, making it one of the most indebted countries in the world. In January, a Hong Kong court ordered the company to go into liquidation. In September, the Chinese Communist Party disappeared its founder, Yan Huixiang, and placed him in “police custody” at an unknown “designated location.” He has not appeared in public since then.
File/Residents pass near Evergrande’s headquarters in Shenzhen, southern China, Thursday, September 23, 2021. A struggling Chinese real estate developer with $310 billion in debt is asking investors who hold one of its bonds to postpone repayments. (AP Photo/Ng Hang-guan, File)
While Hui was missing, Chinese police raided the offices of Evergrande’s financial services department and arrested several executives. The report only vaguely indicates that the Communist Party suspects Evergrande is not properly disclosing its revenues and debts.
Adding fuel to the conspiracy, in October, pro-communist billionaire Huang Hongsheng denounced Hui as an “enemy of the Chinese people” on the regime-controlled site WeChat, calling other Chinese He released a video screed warning businessmen to avoid his fate.
Wong reportedly said, “Mr. Hui chose to become an enemy of the Chinese people by filing for bankruptcy protection in the United States in order to take advantage of the conflict between China and the United States to hide his wealth. That’s despicable,” he said. translated by South China Morning Post (SCMP).
“All of us entrepreneurs should take this as a warning. When faced with difficulties, we must do everything in our power to solve them. We must avoid deception to protect our wealth. “We cannot play this game and cause the country and its people to suffer,” he continued.
Monday’s announcement of Hui’s lifetime ban on securities trading revealed potential Chinese criminal charges against him and Evergrande.According to the national government Global Times As a propaganda vehicle, the China Securities Regulatory Commission (CSRC) accused him of “determining and organizing financial fraud with particularly malicious means, with serious consequences, according to the CSRC.”
Specifically, the Chinese government accused Hui of “inflating Evergrande Real Estate’s revenue in its 2019 and 2020 annual reports, which amounted to more than 564 billion yuan, or $78 billion.” I’m blaming. The Chinese government claims Evergrande used these false reports to secure corporate bonds and conduct other business that would not have been possible had such large profits not been documented.
Hui was no longer allowed to operate in the securities markets and was fined $6.53 million “for engaging in serious financial fraud.”
On January 31, 2024, a mostly deserted Evergrande Plaza shopping mall developed by China Evergrande Group in Beijing, China. China Evergrande Group’s creditors intend to recover a small portion of the construction company’s billions of dollars in debt. Most of their assets are likely to be difficult for liquidators to access.Source: Bloomberg
Another Evergrande executive, former vice chairman Xia Navy, was similarly permanently banned from trading in securities and ordered to pay $2 million. Evergrande itself was fined $580 million.
bloomberg observed On Tuesday, it was announced that the $78 billion fraud charge is one of the largest in history, dwarfing the likes of Enron.
“Bloomberg’s index of China development stocks fell as much as 1.1% in early trading on Tuesday, bringing losses over the past year to 54%,” the newspaper reported.
The charges appear to be an attempt by the Chinese Communist Party to demonstrate to foreign investors that there are robust mechanisms in place to punish and weed out fraud, and that their funds are safe within the country. Party officials said at this month’s “two sessions,” the annual gatherings of China’s rubber communist legislature, the National People’s Congress, and its advisory body, the Chinese People’s Political Consultative Conference, Priority was given to external messages in this direction. It is a gathering of party elites and their friends. In his opening remarks, genocidal dictator Xi Jinping emphasized the development of what the party called “new high-quality productive forces” – the development of new industries in as yet unknown fields of the future.
Mr. Xi also called on the party to do more to support economic fundamentals such as manufacturing and real estate to ensure a friendly environment for foreign investors.
“We need to avoid rushing into projects, preventing the formation of industry bubbles, and avoiding adopting only a single development model,” Xi said, according to state media.
“We must prevent a local rush and oppose irrational and blind investments that create bubbles,” he said. South China Morning Post Quote He says: “Promoting new productive forces does not mean ignoring or abandoning traditional industries.”
