LThe Cantonese call it Hui Ka Yan, the Pekingese call it Xu Jiayin, its name in Mandarin. He was born in a small village in Henan, central China. His father, a veteran of the war against the Japanese, sold wood there. A good student, he became an engineer and joined state companies. He quickly resigned and went south, to Shenzhen then Guangzhou, where money and opportunities flowed freely in the late 1990s.
He founded the Evergrande group in 1997. Twenty years later, he became the richest man in China, with a fortune estimated at nearly 40 billion euros. He owns the Guangzhou football club and decided, in 2019, to launch into the production of electric cars. A connoisseur of customs, he is a member of the Communist Party elite and relies on his connections in high places. He is now being held by the police and his business is on the verge of liquidation.
Following the publication, by the Bloomberg agency, of the news of his arrest, the listing on the Hong Kong Stock Exchange of the various Evergrande entities was immediately suspended on Wednesday September 27. The company, the second largest real estate developer in the country, is in the process of collapsing under the weight of its debt: nearly 307 billion euros. She has an appointment on October 30 with the Hong Kong courts to rule on its possible liquidation.
Exchange losses
Evergrande is not the only real estate developer to find himself in hell. Indeed, Country Garden, Sunac and many others find themselves trapped in debt. The authorities decided to tighten credit conditions to clean up the market and punish all these real estate tycoons who believed themselves to be masters of the world. But at the same time, the market turned around with the Covid-19 crisis and the loss of confidence of fewer and fewer buyers.
As if that were not enough of their misfortune, the country’s monetary policy also works against them. According to the Japanese daily Nikkei, more than a quarter of Evergrande’s debt is denominated in dollars. However, the Chinese currency, the renminbi, is at its lowest level against the American currency in sixteen years. Result: exchange losses which further burden the accounts and new money more difficult to find.
The rating agency Moody’s has thus downgraded the entire Chinese real estate sector. There is obviously no question that Beijing will change its low interest rate policy, responsible for the fall of the renminbi, to please a few business megalomaniacs. But the government is nevertheless following this affair like milk on fire in order to prevent it from further worsening the situation of a sector which represents, in itself (including construction), more than a quarter of the economy. national. For Xi Jinping, beautiful stories like that of Xu Jiayin are now a thing of the past.