Evergrande billionaire detained after wealth unit runs dry

investmentnews.com:

China Evergrande Group wiped out international investors, roiled financial markets and left thousands of suppliers in the lurch. Yet it was the developer’s failure to pay households who invested in its wealth management products that may have provided the last straw for Chinese authorities.

Almost two years after Evergrande defaulted on its debt, its billionaire founder and chairman, Hui Ka Yan, is under police control on suspicion of committing unspecified crimes. Staff at the group’s wealth management business have been detained. Hui’s son Peter Xu, who once ran the firm’s wealth unit, was also taken into custody, local media reported.

The actions came after the company’s money management arm said it was unable to make payments in August on investments held by retail clients. Evergrande, like many other Chinese developers, sold high-yielding wealth management products to individual investors to help fund their operations when other financing avenues were becoming tougher to tap. 

The detentions are consistent with the Chinese government’s priority to look after citizens rather than other stakeholders such as foreign bondholders, in line with President Xi Jinping’s desire to avoid social unrest and achieve “common prosperity.” They also send a signal to other debt-laden developers to focus on finishing apartments and paying consumers who are owed money. 

“As the property sector is unlikely to provide an engine of growth, a prominent property tycoon makes a politically effective target,” said Rana Mitter, a professor of Chinese politics at Oxford University. “The Communist Party wants to demonstrate that what it views as anti-social business behavior will be penalized.” 

Evergrande’s wealth unit ran into problems two