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Evergrande’s home page is frozen in time from just over a year ago. Back then its founder, Hui Ka Yan, still seemed confident he could save the world’s most indebted developer. “All Evergrande employees must. . . never give up,” the charismatic tycoon tells executives in a video, urging them to finish thousands of apartments left unfinished after the company officially defaulted on its $300 billion debt in 2021.
But courageous words could not avert disaster. This week a judge in Hong Kong declared “enough”. Evergrande, whose collapse helped trigger a property crisis that triggered a slowdown in the world’s second-largest economy, is expected to be liquidated. Hui was unable to react. The businessman, called Xu Jiayin in Mandarin, disappeared in September and is detained somewhere in China on charges of involvement in “illegal crimes”.
But the sentence and his detention represent an ignominious end to the rise of a former steelworker who became one of China’s biggest earners during the boom years. In less than three decades, Hui built one of the country’s largest real estate companies while dabbling in football, electric vehicles and theme parks. He used his fabulous wealth to curry favor with elites, from Beijing’s “red aristocracy” to the British royal family.
“Of all the developers, I have to say he was one of the most aggressive,” says Desmond Shum, author of Red Roulette, a book about elite Chinese business and politics, who knew Hui in his heyday. “So when the market changes, it’s not surprising that these people are the first to end up on the chopping block.”
Like many of his generation, Hui’s personal life mirrored China’s rapid changes after the opening of the economy in the late 1970s. Born into poverty in Henan province, he was raised by his grandmother. After working in the steel industry in the 1980s, he launched Evergrande in 1996, just in time to catch the real estate boom driven by China’s new middle class.
After expanding to 280 cities, Hui has invested in theme parks and poured funds into a government “slum” redevelopment program, according to Evergrande’s website. That left it heavily exposed to China’s smaller cities, where experts warned the market was heading for oversupply.
He and other developers often sold homes before construction, using the funds to acquire land while banks offered mortgages on the unbuilt properties. Developers and local governments have become dependent on the debt-fueled model. “That’s the problem with a bubble. Once in, you’re in: it’s almost impossible to get out,” said Zhu Ning, a professor at the Shanghai Advanced Institute of Finance and author of China’s guaranteed bubble.
Hui came to embody a brash new generation of Chinese tycoons, sporting a gold Hermès belt buckle, buying villas in Sydney, Hong Kong and London and flying around in private jets. In 2015, he bought a 60-metre mega yacht and celebrated the victory of his football team, Guangzhou Evergrande, in the Asian Champions League, with internet billionaire co-owner Jack Ma and Britain’s Prince Andrew. In 2017, he topped Forbes’ Chinese Rich List, with a total net worth of nearly $43 billion.
Those who knew him say he had an easy-going and brilliant personality, perfect for high-level networking. According to a banker: “Hui is a person with a high IQ. . .[otherwise]How did he manage to convince some big Hong Kong financiers to invest in him and Evergrande?”
Hui’s downfall began in 2020, when President Xi Jinping’s government introduced a new policy of limiting leverage in an attempt to correct economic imbalances. Evergrande’s aggressive model meant this quickly resulted in a liquidity crisis. The restructuring of the offshore bonds was effectively blocked last year after authorities found irregularities in the mainland branch, which led to the liquidation.
Few expect, however, that the liquidation order will extend to the mainland. Beijing will not relinquish control of the potentially politically explosive process of resolving the debts of Evergrande and other developers – and completing their vast number of unfinished apartments, analysts said.
Hui was unavailable for comment and Evergrande did not immediately respond.
Many now believe Hui may follow other tycoons who have clashed with Beijing, such as Xiao Jianhua, a politically connected financier who was kidnapped from the Four Seasons in Hong Kong by Chinese agents in 2017 and sentenced to 13 years in prison. “Even if someone wanted to contact him [Hui]they may not be able to do it,” Hong Kong tycoon Joseph Lau, who played cards with him, told reporters in November.
Its fall marks the “end of an era,” Shum says. “Many Chinese businessmen in recent decades have taken maximum risk because the economy was on a one-way upward trend. . . So when the recession comes during the Xi era, people are completely unprepared.”
Hui’s legacy promises to be mixed at best. On the outskirts of Beijing, Central Mansion is a former Evergrande residential complex “saved” by state-owned China Railway Construction. After a long period of inactivity, six of the 15 buildings were finished this month, an agent said, with the rest expected by the end of 2024.
One client tells the Financial Times she is worried about her investment after the liquidation: the complex will still be managed by an affiliate of Evergrande Property Services. But the estate agent reassures the FT that “there is nothing to worry about” – Evergrande no longer has any real influence. “After all, Chief Xu is still behind bars,” she says.
With additional reporting by Cheng Leng in Hong Kong, Ryan McMorrow in Beijing and Sun Yu in New York