Debt-stricken property developer China Evergrande announced Thursday that its Chairman was suspected of “illegal crimes,” following the suspension of the trading of its shares earlier in the day. The company made its announcement to the Hong Kong Stock Exchange, one day after reports leaked out that Xu Jiayin was being held by the police.
The decision to suspend the trading of shares was left mired in mystery, with no official reason given for the decision. The decision also affected the property services and the electric vehicles units of the company.
However the suspension of trading was followed late Thursday by a statement from the company saying that it had “received notification from relevant authorities” that Xu “has been subject to mandatory measures in accordance with the law due to suspicion of illegal crimes.” No further details were made available, however.
Bloomberg news reported Wednesday however, that Xu was under “residential surveillance,” which does not indicate he was either arrested or charged with a crime, according to anonymous sources.
The developer had become emblematic of the growing property sector crisis in China which has seen several high-profile developers succumb to a sea of debt, leading to concerns that the country’s wider economy might begin to falter, followed by a contagion to the broader global economy.
Presently it is only a month since the company resumed trading after a 17 month halt which had been triggered by the developer’s failure to publish financial results.
At the end of June the company had estimated its debts at $328 billion.
The company had revealed on Sunday that it cannot presently issue new debt because its subsidiary Hengda Real Estate Group is under investigation. And last Friday, it said meetings it had planned for this week to hash out a key debt restructuring plan have been put on hold.
The company said it would need to “reassess the terms” of the plan in order to adapt to the “objective situation and the demand of the creditors.”
This week the property arm of the company missed a key bond payment, and it was reported by Chinese financial website Caixin that former executives had been detained by authorities.
The crisis led to a broader slowdown in the second largest economy in the world.
Along with construction, the property sector accounts for roughly a quarter of the GDP of the nation, and has long been seen as a vital element of the national economy. In recent decades, it has boomed.
However as its biggest firms have racked up enormous amounts of debt, Beijing has begun to view it as an unacceptable risk for China’s financial system, and the overall health of the nation’s economy.
