Several employees of Evergrande’s financial subsidiary, Evergrande Wealth Management, have been detained according to a statement released by the Shenzhen police department.
The statement didn’t reveal the number of employees detained or what charges they are facing but did urge the public to report any suspected fraud to the authorities.
Evergrande, the world’s most indebted property developer, is currently struggling under hundreds of billions of dollars worth of debt and recently sought bankruptcy protection in a New York court.
On Monday, following the news over the weekend, Evergrande’s share price plummeted 25 percent in Hong Kong before recovering somewhat.
The head of money and markets at Hargreaves Lansdown, Susannah Streeter, told Sky News, “The detention of Evergrande employees, working in wealth management, has prompted a big slide in the real estate giant’s share price amid nervousness that fresh fragilities will be uncovered.”
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The police statement revealed that there will be “apparent action against a senior figure within Evergrande’s wealth management arm, Du Liang, and others,” Sky News reported.
The statement read, “Recently, public security organs took criminal compulsory measures against Du and other suspected criminals at Evergrande Financial Wealth Management Co.”
READ MORE:
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- China’s Real Estate Giant Evergrande Loses Over $112bn in Two Years, Has Hundreds of Billions More in Liabilities
‘Worries swirl’
Streeter said, “Authorities are swooping deeper into the internal workings of the company, as worries swirl about the sector’s woes potentially causing pools of financial instability elsewhere requiring fresh patch-ups, which could further drag down economic growth,” adding that, “Attempts to stem the slowdown in China through stimulus measures do appear to be bearing some fruit with Friday’s data on industrial production and retail sales rising more than expected and there are expectations more help could be on the way.”
The detentions come after another one of Evergrande’s business units, Hengda Real Estate Group, became a target of a probe in mid-August.
According to the developer, in a filing to the Shanghai Stock Exchange on Aug. 16, the China Securities Regulatory Commission (CSRC) sent it a letter about the probe.
“The company is actively assisting the regulator in conducting the probe,” Hengda said in the filing.
The indirectly owned unit of Evergrande Group, Hengda, has been reprimanded by the Shanghai and Shenzhen stock exchanges for breaching listing rules that required the company to publish its 2021 annual report by Apr. 30 last year. It stated that it would “accept any disciplinary action” placed upon it, but to date it doesn’t appear any action has been taken.
READ MORE:
- Evergrande Fails to Make Overdue Coupon Payments for Bondholders
- Evergrande Chairman’s Hong Kong Mansion Seized By Bank – Media Report
- US Officials Highlight Depth of China’s Economic Crisis
$112bn loss over two years
In July, Evergrande revealed, via long-awaited financial reporting, that the company lost over $112 billion from 2021 to 2022 and that it currently has liabilities totaling nearly $340 billion.
To put that into perspective, Evergrande has liabilities that exceed the Gross Domestic Product (GDP) of countries like Finland, Portugal and New Zealand.
In a stock exchange filing the company said the loss showed, “the existence of material uncertainties that may cast significant doubt on the Group’s ability to continue as a going concern.”
Evergrande suffered a net loss of 686.22 billion yuan or US$94.9 in 2021, and 125.81 billion yuan in 2022, or US$17.4 billion, bringing the total loss to just over US$112 billion.
In 2021, when it was discovered that the real estate juggernaut was drowning in hundreds of billions in debt, it sparked a nationwide property crisis that reverberated across the globe.
At the time the company said that it was unable to publish its 2021 audited financial results due to “a large number of additional audit procedures” in addition to the COVID-19 pandemic.
A year prior, in 2021, the company said it had total liabilities of upwards of 1.97 trillion yuan or US$272 billion by today’s exchange rate.
