Staff of Evergrande’s wealth management unit detained by police, criminal probe pending
Published: Sep 17, 2023 12:12 PM Updated: Sep 17, 2023 12:06 PM
Evergrande Group Photo: CFP

Evergrande Group Photo: CFP

Several employees working in the wealth management unit of the debt-ridden property developer Evergrande Group have been placed under criminal probe, signaling that China has gone a step further in tackling the problems of its property market.

The case "is subject to further investigation," Shenzhen police in South China's Guangdong Province said in a statement on Saturday night following a recent police action. 

Investors who bought Evergrande's "wealth management" products can report their cases through online channels, telephone calls, text messages and other means, the statement read.

According to tianyancha, a corporate information platform, Evergrande Financial Wealth Management Co was set up in 2015, and was described as a wholly owned subsidiary of Evergrande Group.

On August 31, Evergrande's wealth management unit made an announcement, saying the company's asset disposal progress was not proceeding as expected, and it had not obtained asset disposal funds, so it could not make repayments for that month. 

As of December 31, 2022, the unpaid principal and interest of Evergrande's wealth management products stood at nearly 34 billion yuan ($4.7 billion).

In another development, Evergrande's life insurance arm on Friday was taken over by state-backed Hai Gang Life, according to a notice issued by the National Administration of Financial Regulation on Friday.

Local media earlier reported that Evergrande Life Assurance Co had become seriously insolvent, suffering huge losses. Hai Gang Life has registered capital of 15 billion yuan and will take over the assets and debts of Evergrande's insurance unit.

Evergrande Group is in the midst of a restructuring, with the long-running process hanging in the balance after a key vote on its offshore debt restructuring plan was delayed until October.

Evergrande's three main listed companies - China Evergrande Group, Evergrande Property Services Group and China Evergrande New-Energy Vehicle Group - have issued their financial statements and resumed trading on the Hong Kong stock market.

On Friday, China released data related with the real estate sector in the first eight months, showing that recovery signs were emerging. New home sales totaled 73.86 million square meters in August, up 4.8 percent from July, according to data released by the National Bureau of Statistics on Friday.

A month-on-month upward trend has begun to appear. Market sentiment is clearly positive, Yan Yuejin, a research director at Shanghai-based E-house China R&D Institute, told the Global Times on Sunday.

However, some foreign media rushed to talk down China's real estate sector after Friday's data release.

Chinese analysts believe that the real estate industry has experienced some difficulties, but they are largely short-term issues and China's real estate sector has great potential for further development. 

Analysts noted that China's urbanization rate was 66 percent in 2022. From the perspective of global economic development, before the urbanization rate reaches 75 percent, no country's real estate has encountered a sustained or irreversible bubble collapse. 

China's urbanization is expected to maintain an average annual growth range of 0.5-0.8 percent, coupled with inter-city population migration, an economic recovery that drives residential housing consumption and sufficient medium- and long-term inelastic demand for housing, they said.

"At present, there are many pro-growth policies for the property sector. It is necessary to organize local media, experts, and industry associations to help buyers learn about the policies and know how to use them," Yan said. 

Global Times