Recently, there have been reports indicating that the founder of Evergrande Group, Xu Jiayin, has been transferred to a special detention facility in Shenzhen, with his “physical condition being good.” It is still unclear whether the former richest man in China has been formally charged, and officials have not specified how long he will be detained.
According to a report by Reuters, Xu Jiayin has been moved to a special detention facility in Shenzhen. Sources familiar with the matter stated that Xu Jiayin is currently in good health, receiving medical care and enjoying good food in the detention facility. Usually, the treatment in a special detention facility is better than in a regular detention facility.
It was mentioned that Xu Jiayin was initially detained in Beijing and was transferred to Shenzhen a few months ago to facilitate communication with senior executives of Evergrande. While in detention, Xu Jiayin is allowed to write letters to people, including employees of Evergrande Real Estate, and sign company documents. It is reported that he had written to senior executives urging them to expedite the settlement of financial product investors’ withdrawals upon entering the detention facility.
On the evening of September 28, 2023, Evergrande announced that Xu Jiayin, the company’s executive director and chairman, had been subjected to coercive measures due to alleged illegal activities. Since then, Xu Jiayin has not been publicly visible.
In May of this year, the China Securities Regulatory Commission issued a warning to Evergrande Real Estate for fraudulent issuance and violations of information disclosure in the bond market, imposing a fine of 4.175 billion yuan. Simultaneously, Xu Jiayin, the actual controller of Evergrande, was fined the maximum penalty of 47 million yuan and faced a lifetime ban from the securities market.
Political commentator Lan Shu, who resides in the United States, stated in an interview with a reporter from Dajiyuan on September 21 that Xu Jiayin’s transfer to detention in Shenzhen was primarily due to Evergrande’s headquarters being located there, making it easier for him to handle internal affairs under the authorities’ requirements.
Lan Shu expressed that from Xu Jiayin’s letter to senior Evergrande executives, it is evident that Xu Jiayin is fully compliant with the arrangements made by the Chinese Communist Party (CCP), essentially in a bid to “save his life.” The CCP’s demand for Xu Jiayin to do so serves another purpose, which is to make him an example and warn other real estate or private entrepreneurs that they will also be handled in the same manner in the future.
Media professional Ye Zhiqiu, residing in New Zealand, told the Dajiyuan reporter that Xu Jiayin’s “good physical condition” in detention indicates his active cooperation with the authorities’ investigation. If Xu Jiayin does not cooperate, the CCP may take more stringent measures, including resorting to coercion. “Since his living conditions in detention are acceptable, it implies that he is actively cooperating with the investigation, while also hinting that those behind him cannot escape being held accountable.”
On September 11, a UK court ruled that Xu Jiayin’s ex-wife, Ding Yumei, was granted a monthly allowance of up to £20,000 for living expenses.
This ruling is related to the progress of the liquidator of Evergrande’s pursuit. On August 5, Evergrande announced that the liquidator had filed a lawsuit in the High Court of Hong Kong against Xu Jiayin, former president Xia Haijun, former CFO Pan Darong, Xu Jiayin’s ex-wife Ding Yumei, and three associate companies to recover approximately $6 billion in dividends and compensation.
Following the liquidator’s lawsuit, Ding Yumei’s assets in the UK were frozen, allowing her to withdraw up to £20,000 per month for living expenses. According to court documents, Ding Yumei was approved for monthly living expenses and paid up to £350,000 in legal fees in August.
Evergrande’s 2023 annual report shows that Ding Yumei owns 5.99% of Evergrande’s shares.
It is reported that Ding Yumei has over $4 million in her UK bank account and resides in a luxury apartment in London. The apartment project is developed by Zhongyu Zhidi Holdings, whose chairman is Xu Jiayin’s friend Zhang Songqiao.
During the 2021 Evergrande debt crisis, Xu Jiayin and his wife Ding Yumei jointly sold 1.2 billion shares of Evergrande stock to cash out. Following this sale, their ownership percentage of Evergrande decreased from 76.69% to 67.87%.
Subsequently, reports surfaced in 2022 that Ding Yumei had completed divorce procedures with Xu Jiayin. In a strategic investor announcement by Evergrande Auto on August 14, 2023, Ding Yumei was described as an “independent third party separate from the company and its affiliates.” Prior to this, Ding Yumei was referred to as “Mrs. Xu” in Evergrande Properties’ 2022 annual report.
Following the Evergrande debt crisis, Xu Jiayin and his wife first sold a large amount of stock to raise capital, with subsequent reports of their divorce. It was widely speculated that this may have been a “strategic divorce” aimed at transferring assets abroad to evade potential debt settlements or other financial risks in the future.
Ye Zhiqiu stated that Xu Jiayin and Ding Yumei’s “divorce” was actually a technical operation to transfer assets. The fact that Ding Yumei’s assets were frozen indicates that this asset transfer plan did not succeed. “With so much debt, creditors will not let her escape. Therefore, the so-called asset transfer ultimately ends up being futile.”
It is noteworthy that before the UK court restricted Ding Yumei’s unrestricted asset disposal, some of Xu Jiayin’s and Xia Haijun’s assets in Hong Kong had already been put up for sale. Additionally, some luxury residences of Xu Jiayin and Ding Yumei in Hong Kong have also been taken over by creditors or companies.
On September 18, reports revealed that the High Court of Hong Kong recently completed a hearing related to Xu Jiayin. The court’s decision indicated that one of Xu Jiayin’s properties in Tsim Sha Tsui, Hong Kong, would be auctioned to repay some of the debts.
Earlier this year, Evergrande was declared bankrupt. The Hong Kong High Court had previously ruled that Xu Jiayin must repay over 5.3 billion yuan in debts to Haitong Everfine under the circumstances of an absolute debenture. Failure to do so would result in the sale of his property to offset the debt.
The case recently went to trial, with Haitong Everfine requesting that Xu Jiayin hand over an unoccupied property in Tsim Sha Tsui and arrange for its sale under court direction. On September 16, in Xu Jiayin’s absence, the High Court of Hong Kong approved the execution of the debenture. Once the property is auctioned, the proceeds will be used to repay some of the debts.
In contrast to the luxurious properties used to offset debts in Hong Kong previously, this time the property being auctioned by Xu Jiayin is a modest one. The property is located at Unit 6A, 6th Floor, Phase 144 of Ko Shing Building on Nathan Road, Kowloon, with an area of approximately 375 square feet, comprising two bedrooms and one living room. The current market value is approximately 4.96 million Hong Kong dollars (around 630,000 US dollars).
Although this property holds special significance in Xu Jiayin’s rise to wealth – in the late 1990s, when Xu Jiayin first entered the real estate market and made his initial fortune, he spent 1.75 million Hong Kong dollars to purchase this property. It was not only Xu Jiayin’s first property in Hong Kong but also the only property he personally owned in Hong Kong, often referred to as his “starting point.”
On September 13, the Chinese Ministry of Finance and the China Securities Regulatory Commission simultaneously issued a “maximum penalty” decision against one of the world’s four major accounting firms, PricewaterhouseCoopers (PwC), imposing a fine of 441 million yuan, suspending business operations for 6 months, and revoking PwC’s Guangzhou branch.
This marks the largest fine imposed by the Chinese authorities on the four major international accounting firms and the first significant penalty against an auditing firm related to the real estate industry collapse.
Since January of this year, the Chinese Ministry of Finance conducted a special inspection of the audit quality of PwC and its Guangzhou branch’s projects on Evergrande Real Estate Group Limited.
The penalty decision shows that the Chinese Ministry of Finance fined PwC a total of 116 million yuan for its illegal actions in the 2018 audit project of Evergrande Real Estate. At the same time, PwC received a warning, suspended business operations for 6 months, and revoked its Guangzhou branch. The registration certificates of four signing registered accountants were revoked, while seven accountants involved in preparing Evergrande Real Estate’s consolidated financial statements were subject to warnings or fines.
Ye Zhiqiu stated that PwC effectively turned a blind eye to financial irregularities at Evergrande, playing a role of enabler in these illegal activities. The substantial fine levied by the Chinese authorities against PwC indicates that they will not spare anyone who assisted Xu Jiayin and Evergrande in carrying out these deeds.
He also believed that this action signifies that Xu Jiayin, as well as other related individuals behind Evergrande, are also targeted for accountability by the authorities. Ultimately, no one can escape. This amounts to a clear warning issued by the authorities.