After defaulting on its debt two years ago, Chinese real estate developer Evergrande was meant to be restructured and allowed to get back on its feet. But that plan now looks to be in peril, after police detained its chairman as well as staff at a financing subsidiary.
Xu Jiayin, also known as Hui Ka Yan in Cantonese, has been subject to “mandatory measures” on suspicion of crimes, Evergrande said Thursday in a filing to the Hong Kong stock exchange.
The company didn’t elaborate on Xu’s location or the nature of the alleged crimes. Under the Chinese legal system, “mandatory” or “compulsory” measures can include detention and formal arrest.
Xu founded Evergrande in 1996. His detention casts further serious uncertainty on the future of the embattled property giant, which was hoping to finalize a massive government-supervised debt restructuring plan in the coming weeks to stave off collapse.
Evergrande, which still has $300 billion in liabilities and continues to bleed money, had already warned Sunday that the restructuring plan may be in trouble because of a regulatory probe into its main property development subsidiary in mainland China. Meetings with creditors were postponed.
it’s probably only beneficial to China if the housing bubble is deflated. Astronomically inflated housing prices are only bad for economic growth in any country as they create unnecessary upward pressure for mortgages and rents that then push up wages in high housing cost areas and therefore make it more unaffordable to do business and produce things.
The only problem is to make sure it doesn’t just spiral out of hand and that all housing projects of Evergrande will finish and people wont lose their homes. Then investors can realize their losses as they should and not expect a bailout.