China Evergrande Group’s woes continue as part of its wealth management unit were detained. Image source: Dinkun Chen via Wikimedia
Shares of China Evergrande Group dropped sharply by 25% yesterday after police detained some of its wealth management staff.
The news suggests an additional investigation for the world’s most indebted property company.
Evergrande is at the centre of China’s real estate crisis, caused by a string of defaults beginning in late 2021, sparking fears of global market contagion that could result in another 2008-style recession.
Disgruntled investors and customers protested at its Shenzhen headquarters in 2021, fearing that the developer would be unable to complete its ongoing projects or return the funds it had already acquired.
Police in China’s southern city of Shenzhen named Du Liang, the general manager and legal representative of Evergrande’s wealth management division, as a person they were taking action against.
“Recently, public security organs took criminal compulsory measures against Du and other suspected criminals at Evergrande Financial Wealth Management Co,” Shenzhen police said via a statement on social media over the weekend.
However, at the time of writing, it has not been confirmed if Du was one of the staff members that the police had detained.
Evergrande has also yet to provide a media comment at the time of writing.
Last month, the property company posted a January–June net loss of 33 billion yuan (AU$7.03 billion), a comparative improvement to its 66.4 billion yuan (AU$14.14 billion) loss during the same period in 2022.
Evergrande was originally meant to make a decision on its offshore debt restructuring this month — however on September 8, it announced that the decision had been delayed until October to allow the Hong Kong CEG class holders of debt more time to consider the plan.
Evergrande requires the approval of more than 75% of the holder in each of its debt classes in order for its plan to be approved. The plan offers creditors various options to swap debt for new bonds and equity-linked instruments that are back by the stocks of Evergrande and its units listed in Hong Kong.
