The stock of the Chinese real estate developer Evergrande was suspended Thursday morning on the Hong Kong Stock Exchange, a day after a press report that its boss is under house arrest after being arrested earlier this month. Share trading in its real estate services and electric vehicle manufacturing subsidiaries was also halted at 9:00 am (01 GMT), according to notices published by the Hong Kong stock exchange.
On Wednesday, the financial agency Bloomberg, citing anonymous sources, had claimed that the founder and boss of the over-indebted group, billionaire Xu Jiayin, had been arrested earlier this month by the Chinese authorities and is under house arrest. In mid-September, police in the 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 well-known business media, two former Evergrande executives have also been detained.
The listings of Evergrande and several subsidiaries had resumed in early August in Hong Kong after a suspension of more than 15 months, failing to meet the deadlines for the publication of 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 announcement by the group that meetings on the theme of its restructuring, scheduled for Monday and Tuesday, would finally not take place.
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Slower growth
Evergrande, whose descent into hell regularly makes the headlines, had at the end of June a colossal slate estimated at $ 328 billion (307 billion euros). This week, the real estate arm of the company was unable to make a large payment in respect of a bond. The real estate sector in China has experienced tremendous growth in recent decades, in a country where the purchase of a property even before its construction made it possible to finance other projects. But the indebtedness of the groups has reached such levels that the authorities have decided to put a stop to it from 2020.
Since then, access to credit has been considerably reduced for these groups, some of whom are now struggling to complete the projects, fueling a crisis of confidence among potential buyers that is weighing down prices. Evergrande's huge debt contributed to the deepening of China's real estate market crisis, raising fears of global contagion for a time. This unprecedented crisis has spread in recent months to another heavyweight in the sector, Country Garden, long considered financially sound. The group had at the end of 2022 a considerable debt that it estimated at some 1152 billion yuan (150 billion euros).
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 deepened 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, excluding the period of the coronavirus pandemic.
