(Hong Kong) The shares of Chinese real estate developer Evergrande were suspended on Thursday morning on the Hong Kong Stock Exchange, the day after press reports that its boss is under house arrest after being arrested at the beginning of the month.
Trading in shares of its real estate services and electric vehicle manufacturing subsidiaries were also halted at 9 a.m. (9 p.m. Eastern Time), according to notices published by the Hong Kong stock exchange.
On Wednesday, the financial agency Bloomberg, citing anonymous sources, claimed that the founder and boss of the overindebted group, billionaire Xu Jiayin, had been arrested at the beginning of the month by the Chinese authorities and is under house arrest.
In mid-September, police in the southern Shenzhen metropolis said they had arrested several Evergrande employees. She did not specify their number or what they are accused of.
According to Caixin, a renowned economic media, two former Evergrande executives were also placed in detention.
Listings of Evergrande and several subsidiaries resumed at the beginning of August in Hong Kong after a suspension of more than 15 months, due to failure to meet the deadlines for publishing its financial results.
On September 27, the company announced that it was unable to issue new bonds because its subsidiary, Hengda Real Estate Group, was “under investigation,” preventing a restructuring plan.
This announcement came two days after the group announced that meetings on the theme of its restructuring, scheduled for Monday and Tuesday, would ultimately not take place.
Evergrande, whose descent into hell regularly makes the headlines, had a colossal balance at the end of June estimated at $328 billion (€307 billion).
This week, the company’s real estate arm was unable to make a large bond payment.
The real estate sector in China has experienced meteoric growth in recent decades, in a country where the purchase of a property even before its construction makes it possible to finance other projects.
But the groups’ debt has reached such levels that the authorities have decided to put an end to it from 2020.
Since then, access to credit has been considerably reduced for these groups, some of whom are now struggling to complete projects, fueling a crisis of confidence among potential buyers which is weighing down prices.
Evergrande’s enormous debt contributed to the worsening of the real estate market crisis in China, leading to fears of global contagion.
In recent months, this unprecedented crisis has affected another heavyweight in the sector, Country Garden, long known to be financially solid. The group had a considerable debt at the end of 2022, which it estimated at some 1,152 billion yuan (C$213 billion).
In a country where real estate accounts for more than a quarter of GDP and supports an army of low-skilled workers, it has also aggravated the general slowdown in the world’s second largest economy.
The government has set an economic growth target of around 5% for 2024, which would be one of its worst performances in decades if the period of the coronavirus pandemic is excluded.
