by Guido Santevecchi
The story of Chinese manufacturer Hui Ka Yan who wanted to be “great forever”. Other executives of the real estate company, which is $327 billion in debt, were also arrested
FROM OUR CORRESPONDENT
BEIJING – The founder of Evergrande has not been seen or heard from for some time, a man with excellent connections to the Communist Party and now the protagonist of a red crisis that has shocked the Chinese real estate industry and is shaking the entire second-largest economy in the world. According to the Bloomberg agency, the silence is due to the fact that President Xu Jiayin (also known by his Cantonese name Hui Ka Yan) is under “house surveillance” by the police. According to the sources, Xu/Hui was picked up by officers in early September and taken to a safe location. According to Beijing’s legal procedure, “home surveillance” at a “designated location” is not a formal arrest, it does not provide for automatic incrimination: however, the person cannot communicate with the outside world, cannot receive private visits, and must hand over agent’s passport and other personal documents. And above all, he must cooperate with the investigation. The statutory period for this special supervision obligation is six months.
The situation of the former construction king, who by 2017 had a personal fortune of $42 billion (now reduced to 1.8), signals that the Chinese authorities have expected the collapse of Evergrande, which has debts of $2.39 trillion has yuan, which is equivalent to 327 billion dollars. In recent days, several corporate executives have been arrested, Evergrande canceled the issuance of new bonds that were supposed to provide a breath of fresh air and then failed to pay out a tranche of bonds worth 4 billion yuan ($547 million). On Monday and Tuesday, Evergrande shares lost 32% of their residual value on the Hong Kong stock exchange. News of the “home watch” imposed on the founding president today caused the collapsed real estate giant to lose another chunk of residual value.
The story of 64-year-old Xu Jiayin is a reflection of China’s race for prosperity that began in the 1980s. Deng Xiaoping, who opened China to the market economy, had announced that some comrades would get rich first, “because they even get rich.” It’s wonderful. Xu was born in 1958 in the countryside into a very poor family. “As a child and then as a boy, I ate only sweet potatoes and steamed bread, my clothes were made of rags full of stains. Back then, all I dreamed of was leaving the fields, getting a job in a factory, and eating better. After the Cultural Revolution, which ended with Mao’s death in 1976, the 18-year-old Xu received a scholarship that enabled him to study metallurgy. He was then employed in a state-owned steelworks. “I owe everything to studying and to the Communist Party, which made it possible for me to study,” he said in 2017, at the height of his fortune as an attack capitalist with the blessing of the party-state.
In 1996, the metallurgical engineer founded the construction company Hengda in Guangzhou (Canton), which he soon renamed Evergrande, half English and half Italian to say “Forever Great”. Houses were needed for the workers streaming into the city from the countryside, large office buildings and the former country boy built the first apartment blocks, concrete and steel towers that became symbols of the Chinese boom. He soon established himself as the king of builders in Canton and at that time also earned his name in Cantonese: Hui Ka Yan. He has long enjoyed excellent political relations, reportedly even with the brother of former Prime Minister Wen Jiabao. In 2009, he took Evergrande public in Hong Kong and raised billions of dollars. But on the bond market, his group has become synonymous with over-indebtedness and the real estate bubble, which has been considered China’s biggest financial risk for years.
Xu Jiayin aka Hui Ka Yan has continued his path of success and excess. In 2010, he built the Evergrande Guangzhou soccer club and spent hundreds of millions on players and coaches bought abroad. A sign of the dense web of personal relationships came in 2014 when he sold half of the team to Jack Ma for $200 million: an exorbitant sum. Alibaba’s founder described the investment this way: “The other night I was a little drunk, I met my friend Xu Jiayin, who suggested the deal to me, and I wrote him a nice check.”
A drunken investment: Even the football bubble burst in China, leaving, among other things, unfinished and useless the project that was supposed to give Evergrande the largest and most beautiful stadium in the world, a flower-shaped structure with a capacity of 100,000 seats. The red billionaire began to discover he was in trouble when Xi Jinping stated in 2017 that “the house is for living, not for speculation.” It was the first warning that the wind would soon change.
September 27, 2023 (modified September 27, 2023 | 11:25)
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