Evergrande fined as founder gets life ban from markets
Insolvent developer penalised for inflating sales figures by 564b yuan in years before its collapse
The mainland’s securities regulator fined China Evergrande Group and barred its founder from the capital markets for life, sending a warning shot against financial crimes after the government was forced to intervene to extend lifelines to developers and protect homebuyers.
The China Securities Regulatory Commission (CSRC) slapped a fine of 4.2 billion yuan (HK$4.54 billion) on the insolvent developer, saying the group inflated its sales by 564 billion yuan in the years preceding its collapse. It also fined founder and former chairman Hui Ka-yan 47 million yuan and barred him from accessing the capital markets for life, it added.
Six other current and former executives of the Guangzhoubased developer were slapped with fines of between 200,000 yuan and 15 million yuan, the commission said.
The punishment added fresh signals from Beijing just days after it warned against financial shenanigans and other excesses.
Since 2020, China’s property slump has saddled homebuyers with unfinished projects and inflicted losses on retail stock investors.
“The depth of the alleged fraud is shocking, but should not significantly impact the company or its creditors,” said Brock Silvers, managing director at Kaiyuan Capital in Hong Kong.
“The recent liquidation order probably encouraged authorities to address Evergrande’s situation before liquidators do so.”
Evergrande has the dubious honour of being the world’s most indebted developer, based on its total liabilities of US$332 billion on June 30 last year. The High Court in Hong Kong in January ordered the developer to be liquidated, leaving creditors with pennies on US$20 billion of defaulted offshore bonds.
Its collapse also wiped out as much as US$52.8 billion of market value from the company since its share price peaked at HK$31.55 in October 2017.
Authorities detained Hui in September last year for unspecified crimes.
Apart from Evergrande, Chinese junk-rated developers defaulted on more than US$160 billion of offshore bonds from 2020 to 2023, Goldman Sachs estimated.
Hengda Real Estate, Evergrande’s key onshore operating unit, raised funds from outside investors based on forged financial data, according to an exchange filing in Shanghai. It inflated sales in 2019 by about 214 billion yuan and by 350 billion yuan in 2020, it added.
“Hengda is not an individual case in this situation, and companies should proactively selfregulate as the CSRC is expected to ramp up its crackdown in the future,” said Yan Yuejin, director of E-house China Research and Development Institute.
The harsh penalty reflected the irregularities and breaches that had emerged in China’s property sector in recent decades amid rapid expansion, he added.
Evergrande has more than 1,200 projects at different stages of progress, ranging from near completion to under construction, according to its 2022 annual report. Many of its peers are also struggling with sales.