The billionaire boss of China Evergrande, the world's most indebted property developer, is reportedly being held by police as the company grapples with a severe financial crisis.
Xu Jiayin, also known as Hui Ka Yan, was taken away by authorities earlier this month, according to anonymous sources cited by Bloomberg News. He is reportedly being held under "residential surveillance," which does not mean he has been arrested or charged with a crime.
Privately run pro-government Chinese outlet Guancha also confirmed the report, adding that Xu was taken into custody "a few days ago" and is being held in Beijing.
Evergrande offices in Hong Kong and mainland China did not respond to requests for comment. China's foreign ministry spokesman Wang Wenbin said he was "not aware of the situation" when asked about the Bloomberg report at a Wednesday news briefing.
Evergrande shares in Hong Kong fell precipitously on Wednesday afternoon following a moderate rise in morning trading, closing the day 19 percent down.
The company's enormous debt, estimated at $328 billion at the end of June, has contributed to China's deepening property sector crisis, raising fears of a global spillover.
This week, Evergrande's property arm missed a key bond payment, and Chinese financial website Caixin reported that former executives at the firm had been detained.
The 65-year-old chairman was once China's richest man, with a net worth of $42 billion in 2017. His wealth is now estimated at $1.8 billion, according to the Bloomberg Billionaires Index.
On Sunday evening, Evergrande said it was unable to issue new debt as its subsidiary, Hengda Real Estate Group, was being investigated. That came two days after the company said meetings this week on a key restructuring plan would not take place, adding it was "necessary to reassess the terms" of the plan in order to suit the "objective situation and the demand of the creditors."
China's property sector is a key pillar of growth, accounting for about a quarter of gross domestic product. But the massive debt accrued by the industry's biggest players has been seen by Beijing in recent years as an unacceptable risk for the financial system and overall economic health.
Authorities have gradually tightened developers' access to credit since 2020, and a wave of defaults have followed — notably that of Evergrande.
Earlier this month, authorities in the southern city of Shenzhen said they had arrested several Evergrande employees, also calling on the public to report any cases of suspected fraud.
Another Chinese property giant, Country Garden, has narrowly avoided default in recent months, after reporting a record loss and debts of more than $150 billion.
The detention of Xu Jiayin is a significant development in the Evergrande saga. It suggests that the Chinese government is taking the company's debt crisis very seriously and is prepared to take drastic action.
The timing of Xu's detention is also notable. It comes just days before Evergrande is due to make a key interest payment on a dollar bond. If the company defaults, it could have a ripple effect throughout the global financial system.
The Chinese government is likely facing a difficult balancing act. It needs to take steps to address Evergrande's debt crisis, but it also needs to avoid a disorderly bankruptcy that could damage the country's economy.
It is possible that the government is detaining Xu Jiayin in order to put pressure on him to reach a debt restructuring agreement with his creditors. It is also possible that the government is investigating Xu Jiayin for potential financial crimes.
Whatever the reason for Xu's detention, it is a clear signal that the Chinese government is not going to allow Evergrande to fail without a fight.
