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Evergrande on Thursday said its chair, Hui Ka Yan, had been placed under “mandatory measures” on suspicion of involvement in “illegal crimes”, a sign of escalating government pressure on the Chinese developer almost two years after its default shook global markets.
In a statement to the Hong Kong stock exchange, the company said it had “received notification from relevant authorities” of the action against Hui, but gave no further details regarding the measures or any alleged crimes.
Evergrande’s announcement followed a Bloomberg report this week that Hui had been taken away by Chinese police earlier this month and put under so-called residential surveillance, a form of police action short of formal detention or arrest.
Evergrande, which sparked a property crisis in China when it defaulted on its debts in late 2021, had in recent months appeared to be approaching a restructuring agreement with international creditors.
But the company said at the weekend that an official investigation was now preventing it from issuing new notes, citing the need to comply with measures imposed by top financial regulatory bodies in China. Inability to issue new notes would in effect prevent the plan from going ahead.
The last-minute derailment of the deal came as Beijing struggles to contain a cash crunch that continues to weigh on its economically-critical property sector, with fellow developer Country Garden this summer coming close to default and signs of spillover effects at investment firm Zhongrong.
Hui rode the wave of China’s urbanisation to becomes Asia’s richest man, but has seen his wealth plummet and has come under pressure to personally support his cash-starved company.
In an early sign that he had fallen out of political favour, Hui was last year excluded from the Chinese People’s Political Consultative Conference, an advisory body to the National People’s Congress in Beijing that he first joined in 2008.
Evergrande did not respond to an earlier request for comment on the report of police action against Hui. Hui could not be reached for comment.
Beijing sought to rein in its highly-indebted developers in 2020 and has opted against bailing out Evergrande and the dozens of its peers that have defaulted in the past two years. Instead, the government has prioritised ensuring that unfinished construction projects are completed.
But policymakers have in recent months sought to take a more supportive approach, given continued weakness across a sector that typically accounts for over a quarter of economic activity. Major cities have also relaxed restrictions on house purchases that were designed to prevent prices overheating.
Sustained pressure on the once-booming property market is part of an array of economic difficulties facing President Xi Jinping’s government, including declining exports and a disappointing rebound from the lifting of zero-Covid policies earlier this year.
Police in the southern city of Shenzhen, where the group is based, said this month that they had detained some employees at its wealth management unit. The unit used to borrow from retail investors and Evergrande said after the police announcement that some of its staff had been placed under “criminal coercive measures”.