China’s securities regulator has imposed heavy penalties on Evergrande Group, one of the nation’s leading real-estate developers, and permanently banned its founder from the capital markets.
Tuesday, the China Securities Regulatory Commission levied a fine of $583 million on Evergrande over grossly inflating its sales figures by 564 billion yuan in the years leading up to its collapse, the South China Morning Post reported.
This move underscores Beijing’s intensified efforts to curb financial crimes following Evergrande’s collapse, necessitating government intervention after the real-estate group’s financial mismanagement created a widespread risk for the Chinese economy.
Evergrande, dubbed the world’s most indebted developer, reported liabilities totaling $332 billion as of June 30 last year, according to SCMP. The company’s downfall precipitated a loss of approximately $52.8 billion in market value since its share price hit its peak in October 2017, the report continued.
Evergrande’s default led to a significant erosion of market value and marked a pivotal moment in China’s real-estate crisis.
Lintao Zhang//Getty Images News/iStock
This punitive response from China’s securities regulator comes shortly after Beijing issued warnings against financial malpractices amid a housing-market downturn that began in 2020.
This slump has left many homebuyers with uncompleted projects and caused significant losses to retail stock investors.
Hui Ka Yan, Evergrande’s founder and chairman, was fined 47 million yuan and received a lifetime ban from engaging in the country’s capital markets, reported Xinhua, China’s official news agency.
The securities regulator has accused Hui of “making decisions on and organizing financial fraud,” the outlet reported.
“The depth of the alleged fraud is shocking, but should not significantly impact the company or its creditors,” Brock Silvers, the managing director at Kaiyuan Capital in Hong Kong, told SCMP.
“The recent liquidation order probably encouraged authorities to address Evergrande’s situation before liquidators do so,” Silvers continued.
Evergrande’s key onshore unit, Hengda Real Estate, was found to have raised funds through the dissemination of forged financial data, inflating sales figures by substantial margins in consecutive years, SCMP reported.
Hui was detained in September by Chinese authorities in connection with unspecified offenses and put under police control at an unknown location in China. He has not been seen in public since.
Hui joined a list of high-profile entrepreneurs who disappeared from public view after being investigated for financial crimes, coinciding with Chinese leader Xi Jinping’s emphasis on anti-graft campaigns in the public and private sectors.
Besides Hui, the Chinese securities regulator also imposed fines on six other executives from Evergrande, ranging from $27,700 to $2 million, SCMP reported.
“Hengda is not an individual case in this situation, and companies should proactively self-regulate as the CSRC is expected to ramp up its crackdown in the future,” Yan Yuejin, the director of the Shanghai-based E-house China Research and Development Institute, told SCMP.
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