The financial markets regulator of China has imposed a hefty fine of $583.5 million on Hengda Real Estate, the mainland business of Evergrande. This move comes in the wake of allegations against Mr. Hui, the former chairman of Evergrande, who faces potential lifetime banishment from China’s financial markets.
The China Securities Regulatory Commission (CSRC) attributes much of the blame to Mr. Hui, once hailed as China’s wealthiest individual, accusing him of instructing staff to manipulate Hengda’s financial results for the years 2019 and 2020. According to a disclosure made by the company to the Shenzhen and Shanghai stock exchanges, Mr. Hui has also been slapped with a fine of $6.5 million.
Evergrande, however, has not responded immediately to a request for comment from BBC.
This development follows a Hong Kong court’s order in January for Evergrande to liquidate its assets. Mr. Hui, also serving as the company’s chairman, had been placed under police surveillance last September amid investigations into suspected illegal activities.
The announcement by the CSRC coincides with its recent commitment to intensify crackdowns on securities fraud and safeguard the interests of small investors with robust enforcement measures.
Evergrande, grappling with a staggering debt of over $300 billion, has become emblematic of China’s real estate crisis. Liquidators have been tasked with evaluating Evergrande’s overall financial health and devising potential restructuring strategies, which may involve asset seizures and sales to settle outstanding debts.
However, the Chinese government may be wary of halting property developments, given the implications for homebuyers eagerly awaiting delivery of properties they’ve already paid for.
The challenges in China’s property market reverberate across the economy, considering the sector’s substantial contribution, amounting to roughly a third of the world’s second-largest economy. Since 2021, stringent measures implemented by authorities to curtail borrowing by major real estate developers have exacerbated the industry’s financial strain, leading to defaults by several prominent firms.
Official data released on Monday underscored the sector’s woes, revealing a 9% year-on-year decline in property investment in January and February. Additionally, new construction starts plummeted by 30%, marking their sharpest decline in over a year.
