China’s real estate giant Evergrande Group is facing a string of adverse news as its chairman, Xu Jiaying, remains in detention for over 7 months. Recently, Evergrande’s second-in-command former president Xia Haijun was fined by the Shenzhen Stock Exchange, with the punishment of a lifetime ban from serving as a director, supervisor, or senior management of a bond issuer. Analysts believe this is related to the escalating power struggle within the Communist Party before the Third Plenary Session.
On the evening of May 13th, the Shenzhen Stock Exchange announced that Xia Haijun, during his tenure as a director of China Evergrande Group, was suspected of violating certain rules and is facing the punishment of being publicly deemed unsuitable for such positions. The Shenzhen Stock Exchange stated that they have been unable to contact Xia Haijun directly and have informed him of the proposed penalty through a disciplinary notice.
Back in March 18th when Xu Jiaying had been detained for 172 days, the China Securities Regulatory Commission had already issued warnings and lifetime bans on Xu Jiaying and Xia Haijun from the securities market, with fines imposed on them. According to the regulatory commission, Xu Jiaying made decisions that led to financial fraud, while Xia Haijun was involved in preparing false financial reports, with their actions deemed especially severe and malicious.
Evergrande has been suspended from trading since January 29th and is currently undergoing liquidation. On April 30th, Evergrande announced a delay in publishing its 2023 annual financial results, citing the need to investigate the company’s current status and prepare financial statements due to ongoing liquidation processes.
Xia Haijun, known as “Xu Jiaying’s most trusted man,” held significant influence within Evergrande, second only to Xu Jiaying. Reports circulating online revealed details of a document outlining the hospitality procedures for senior Evergrande executives, with Xia Haijun holding a prominent position.
Xia Haijun received substantial compensation during his time at Evergrande, ranking as the highest-paid CEO of a Hong Kong-listed Chinese company in 2017 with an annual salary of 270 million yuan (approximately 37.28 million USD). According to Evergrande’s annual reports for 2020 and 2021, Xia Haijun’s compensation reached 204 million yuan (approximately 28.16 million USD) and 202 million yuan (approximately 27.89 million USD) respectively.
In March 2022, Evergrande Property was revealed to have provided approximately 13.4 billion yuan (approximately 1.85 billion USD) in deposit collateral for a third party, leading to forced executions by relevant banks. Xia Haijun, along with two other executives, was requested to resign by the board in connection to this incident.
Since Xu Jiaying’s detention in September last year, several high-ranking Evergrande executives, such as Pan Darong, Ke Peng, Du Liang, and Liu Yongzhuo, have been taken away, but Xia Haijun’s whereabouts remain unknown.
Presently, the Shenzhen Stock Exchange has stated their inability to contact Xia Haijun, prompting speculation about his current status and leading to various rumors circulating in the public domain.
Reports from mainland China indicate that although Xia Haijun officially left Evergrande in July 2022, he maintained close ties with the company. In August 2023, during Evergrande’s bankruptcy protection filing in the US, Xia Haijun assisted Xu Jiaying in liaising with overseas creditors.
On September 25th, 2023, Caixin’s report revealed that Xia Haijun had returned to the mainland in mid-2022 and was taken into custody by relevant authorities, alongside former Executive Director and CEO Pan Darong.
Political commentator Li Yanming suggests that the special measures taken by the Shenzhen Stock Exchange, combined with the lack of contact with Xia Haijun, may indicate that he had fled.
Recent developments have only added to Evergrande’s woes:
– Recently, a luxury residence in Hong Kong’s The Peak purchased by Xu Jiaying in 2010 was sold for 470 million Hong Kong dollars (approximately 60.18 million USD), nearly half the value from March last year at 880 million Hong Kong dollars (around 110 million USD).
– On May 22nd, Evergrande Property added 32 new entries to its list of enforced individuals, with a total amount exceeding 4.14 billion yuan (approximately 570 million USD), relating to cases of disputed notes. With over 790 enforced individuals listed, the total amount involved surpasses 71.6 billion yuan (nearly 9.88 billion USD).
– Evergrande New Energy Vehicle Group, which announced a trading halt on May 17th, disclosed on May 22nd that local authorities demanded the return of rewards and subsidies totaling 1.9 billion yuan (approximately 260 million USD) given to Evergrande Automobile, citing contractual breaches.
– Evergrande Automotive acknowledged that if executed, such actions would have a significant adverse impact on its financial status and operations.
– Earlier in May, two state-owned construction lands in Qingdao and Long Island, with a combined area of 130 mu, were re-auctioned at a reduced price from 171 million yuan (approximately 23.61 million USD) to 137 million yuan (around 18.91 million USD).
Established by Xu Jiaying in Guangzhou in 1996, Evergrande Group, headquartered in Shenzhen, is one of China’s major property developers with projects spanning over 200 cities across the country. In 2021, China Evergrande Group was ranked 122nd in the Fortune Global 500 list.
In 2021, Evergrande’s massive debt crisis caused global market concerns. Evergrande’s financial reports as of June 30, 2023, revealed a total debt of 2.39 trillion yuan (approximately 330.6 million USD). It is estimated that there are around 1.62 million unfinished housing units left by Evergrande, affecting around 6 million homeowners.
Xu Jiaying has been referred to as a white glove of high-ranking Chinese officials, with close ties to families like Zeng Qinghong. Multiple sources confirm that Xu Jiaying’s real estate empire thrived with full support from Zeng Qinghong’s brother, Zeng Qinghuai.
Furthermore, the influence of the Jia Qinglin family is also present behind Evergrande. In the book “Red Roulette” by former husband of Chinese businesswoman Duan Weihong, British national Desmond Shum, it was revealed that in 2011, Xu Jiaying partook in revelries with Jia Qinglin’s daughter Jia Qiang and son-in-law Li Botan in Europe.
Renowned legal scholar Yuan Hongbing, residing in Australia, disclosed that Xi Jinping’s targeting of Xu Jiaying is aimed at the influential figures backing him.
Li Yanming asserts that Xu Jiaying’s case implicates numerous high-ranking officials within the Communist Party. The recent barrage of negative news surrounding Evergrande preceding the Third Plenary Session signifies progress in the Evergrande case while also suggesting a power struggle escalation within the Communist Party. Xi Jinping appears to be using the Evergrande case as leverage to pressure influential family clans.