Business Today: The Rise and Fall of China’s Real Estate Tycoon

The recent revelation by the China Securities Regulatory Commission (CSRC) sheds light on the dramatic downfall of real estate conglomerate Evergrande, led by billionaire Hui Ka Yan. The company inflated its revenue by over $78 billion, equivalent to 1.9 quadrillion Vietnamese dong, over a span of two years, ultimately leading to its current bankruptcy crisis.

Inflated Revenue and Misconduct

Evergrande’s key subsidiary, Hengda, falsely reported an additional 214 billion Chinese yuan (approximately $29.7 billion) in revenue for 2019, accounting for half of the total revenue. This was achieved by recognizing unaccounted revenue. In 2020, the company continued this deception by inflating revenue by another 350 billion Chinese yuan (around 79% of the total annual revenue).

CSRC accused Hui Ka Yan, the founder and former chairman of Evergrande, of directly instructing employees to manipulate Hengda’s financial data. As the supervisory and executive authority, Hui’s use of illegal methods was deemed “extremely severe” by the CSRC.

Consequences and Penalties

Hui was fined 47 million Chinese yuan and permanently banned from participating in the capital market. Hengda, on the other hand, was fined 4.18 billion Chinese yuan. Former CEO Xia Haijun and CFO Pan Darong also received corresponding penalties.

In an effort to mitigate the aftermath, Hui is reportedly selling off assets. One of his mansions in Hong Kong is currently listed on Savills Plc.

From the Pinnacle to Bankruptcy

Once hailed as the richest real estate magnate in Asia, Hui Ka Yan built an extensive empire that spanned various industries, including real estate and electric vehicles.

Evergrande was once China’s largest real estate company but accumulated an enormous amount of debt due to an aggressive borrowing strategy for project expansion. However, Hui’s empire collapsed as credit market regulations tightened, economic growth slowed, and the Covid-19 pandemic reduced sales, resulting in a severe financial squeeze.

According to the CSRC, Hengda exaggerated its profits by 63% and 87% for 2019 and 2020, respectively.

Since September 2023, Hui has been under police control and subject to mandatory restrictive measures due to suspected wrongdoing. However, no criminal charges have been filed against the company’s founder.

The Fading Fortune

Hui Ka Yan, once the second-wealthiest individual in Asia with a total asset value of $42 billion in 2017, has seen his wealth diminish significantly. By 2021, his assets were estimated to be around $1 billion, following Evergrande’s debt collapse.

Evergrande’s stock plummeted and eventually halted trading. In January 2024, the company received a court order to liquidate its assets in Hong Kong, marking the largest real estate collapse in a three-year-long crisis.

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