Evergrande, once China’s second-largest real estate agency and now its most noted debtor, is flirting with liquidation while a stream of troubling headlines accumulates. The latest developments involve the founder and chairman Xu Jiayin, who has been placed under police supervision at an unspecified location, according to Bloomberg. Evergrande’s troubles mirror the broader pains of an industry that powered China’s economic ascent and now drags the country’s growth down.
Residential surveillance marks the early phase of an investigation in China. It does not confirm detention, arrest, or formal charges against Xu, but it does limit movement and communication. The company has not publicly commented on the reports, yet media outlets have noted that Xu has not contacted his staff for weeks.
This is not Evergrande’s first brush with legal challenges. The property management subsidiary, Evergrande Wealth, has seen its executives detained in the southern city of Shenzhen in recent weeks, though the company has insisted the actions will not disrupt operations. In August, Hengda Real Estate, the group’s principal mainland unit, faced investigation by the Securities Regulatory Commission over alleged information disclosure violations. The police activity contributed to a severe stock-market drop and paused bond issuances that could have provided short-term relief amid the company’s cash crunch. Observers see Beijing signaling a tougher stance beyond simple mismanagement.
For two years, the group has sought bargains and restructurings to avoid liquidation, facing roughly $300 billion in debt (about €280 billion). Yet the odds have remained slim. The company’s stubborn efforts to reorganize faltered as it canceled creditor meetings due to liquidity pressures. In March it announced plans to settle offshore debt with notes of varying maturities. It defaulted on $83.5 million of international bonds this week, with other obligations looming. A potential liquidation petition from an international creditor could come in October unless a credible plan is offered, Reuters reported recently.
Evergrande’s crisis encapsulates the health of the broader sector. Xu, raised by his grandmother in rural Henan, founded the company in 1996 along the vibrant east coast. He built his business by buying land with loans, selling homes off plan, and financing new projects with proceeds from early sales. He later joined the Consultative Conference of the National People’s Congress, forged one of the country’s largest fortunes, and purchased the Guangzhou football club, a longtime powerhouse known for high-profile signings that drew attention to the region’s ambitions.
Debt and covid
The playbook seemed to work for decades. A rapid urbanization drive, a growing middle class that viewed bricks as the safest investment, and a relentless pace of economic expansion created a powerful feedback loop. Beijing tightened credit lines for property developers in 2020, and a mounting debt load coupled with the disruption from the covid era tipped the balance. Evergrande defaulted for the first time in a year, and the negative press undercut customer confidence and future sales. A real estate crisis spread through the sector, with Country Garden among the other major players feeling the pressure.
The government has grown anxious about social stability as this crisis unfolds. Some investors worry about falling property values, while others fear they may not receive what they have already paid for. In response, Beijing has begun easing certain restrictions in recent months, allowing the financial system to extend credit to construction firms struggling to stay afloat. The goal is to prevent broad spillover effects that could destabilize the broader economy while keeping a careful eye on the housing market and the people who depend on it.