Inside the downfall of embattled property developer China Evergrande
By Engen Tham, Julie Zhu and Clare Jim
SHANGHAI/HONG KONG — In the beginning, Hui Ka Yan followed a simple formula. Borrow to buy land. Sell homes on the site before they are built. Use the cash to pay lenders and finance the next real estate project.
For two decades, starting in the mid-1990s, this approach was enormously lucrative as Chinese home prices soared. It transformed Hui, a former steel industry employee from a rural village, into China’s richest man. And it turned his company, China Evergrande (HK:3333) Group, into a vast real-estate empire.
But as Evergrande grew increasingly laden with debt, the company resorted to ever-more unorthodox strategies to generate funds.
By 2016, at least one Evergrande subsidiary was encouraging some staff to buy financial products from the group’s wealth-management unit, which helped fund property development, according to a former employee and a company document reviewed by Reuters. The former employee said some people were asked to spend up to half of their salaries on such products.
Hitting up employees for funds, Reuters has found, was just one of a number of unusual practices employed by the company before it came to the brink of a messy collapse in 2021 under the weight of hundreds of billions of dollars of debt. This account of the rise and fall of Hui and Evergrande is based on interviews with more than 20 people who have worked with the tycoon or at his company. All spoke on condition of anonymity.
Evergrande said Hui wasn’t available for an interview. Neither the founder nor the company responded to written requests for comment, including about whether employees were encouraged to purchase financial products, Hui’s management style, the company’s business practices
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