Hui Ka Yan, the embattled founder of the real estate developer China Evergrande Group, has seen his fortune fall from 42,000 million dollars (about 38,535 million euros) to 3,000 million (about 2,752 million euros), in a context of slowdown in the real estate market from the country. He was once one of China’s richest and most influential titans and a bridge between business and high-level politics, but today Hui has lost 93% of his wealth, according to the Bloomberg Billionaires Index.
The troubled 64-year-old tycoon is also looking increasingly politically isolated, with the latest signal coming from the Chinese People’s Political Consultative Conference. This is an elite group made up of regime officials and the biggest names in Chinese business. Since 2008, the businessman has been part of this political advisory body and, since 2013, of its permanent committee, made up of 300 members of the communist elite. However, last year they prevented him from attending to the annual convention, in the wake of his empire becoming the biggest casualty of the country’s credit crunch. And all despite the fact that Hui has invested in areas endorsed by top leaders, such as electric vehicles and traditional Chinese medicine. He is also a prominent philanthropist – although his net worth has suffered completely – while his purchase of the local Guangzhou soccer team indicated that he shared Xi’s passion for the sport. In the end, those political ties were not enough to prevent the debacle.
Xi Jinping’s “common prosperity” campaign to redistribute wealth has led to crackdowns in various sectors. In brick in particular, the imposition of a strict “three red lines” policy to curb debt has exacerbated a crisis affecting banks, trust companies and millions of homeowners. This demonstrates the changing attitude of the world’s second largest economy towards property developers, many of whom have fallen out of favor amid a protracted crisis in the sector that has posed a threat to the broader economy.
In addition, the impact of the harsh “Zero covid” policy, coupled with two years of brutal regulatory repression, have weighed on Chinese tycoons who saw their fortunes plummet last year.
Founded in 1996, Evergrande relied on large loans to fuel its growth, becoming the largest borrower of dollar debt among its peers and, for a time, the nation’s largest developer by contracted sales. The company owns more than 1,300 projects in 280 cities. In 2020 it ran into a cash crunch and outlined a plan to halve its $100 billion debt by mid-2023. But China’s property market began to slow as regulators cracked down on excessive borrowing. Other financing problems sent the company’s stock and bonds tumbling, and after falling behind on some dollar bond payments, the company missed the December 2021 deadline to pay two bond coupons.
The fact casts more doubts on the fate of Evergrande, who has $300 billion in liabilities and has repeatedly missed deadlines to submit a restructuring plan. Its shares have been suspended for almost a year after the company failed to report 2021 results, and PwC resigned as auditor on Monday.
The property giant has been meeting with its creditors in Hong Kong since last week to update them on its progress. Among them are international investors holding around $20 billion of their debt and who have been frustrated by the lack of concrete progress.
Hui’s ambitions have drawn skepticism from analysts. Although Chinese leaders have recently eased their crackdown on the real estate sector, Evergrande is not among those who can breathe a sigh of relief. Its rivals, on the other hand, such as Shimao Group and Yang Huiyan’s Country Garden, have taken the opportunity to raise capital through private placements.