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Chinese Property Giant Evergrande Under Fire For $78bn Fraud

Struggling Chinese real estate behemoth Evergrande and its founder, Hui Ka Yan, are under scrutiny for allegedly inflating revenues by a staggering $78 billion (£61.6 billion) in the two years leading up to the firm’s default on its debt.

The country’s financial markets regulator has imposed a hefty fine of $583.5 million on the company’s mainland subsidiary, Hengda Real Estate.

Additionally, Mr. Hui faces a potential lifetime ban from China’s financial markets.

In January, Evergrande was ordered by a Hong Kong court to enter liquidation.

The China Securities Regulatory Commission (CSRC) has squarely pointed fingers at Mr. Hui, formerly China’s wealthiest individual, accusing him of directing staff to “falsely inflate” Hengda’s annual financial reports for 2019 and 2020.

According to documents filed by the company with the Shenzhen and Shanghai stock exchanges, Mr. Hui has been fined $6.5 million.

Last September, Mr. Hui, who also serves as the company’s chairman, came under police surveillance as part of an investigation into suspected “illegal activities.”

This latest development comes shortly after the CSRC pledged to clamp down on securities fraud and safeguard small investors with robust enforcement measures.

Evergrande has become emblematic of China’s real estate woes, grappling with a debt pile exceeding $300 billion.

Liquidators have been tasked with assessing Evergrande’s overall financial health and exploring potential restructuring avenues, which may involve asset seizure and liquidation to repay outstanding debts.

However, the Chinese government might be hesitant to halt work on property projects amid concerns about meeting the housing demands of numerous prospective homeowners awaiting properties for which they’ve already made payments.

The turmoil in China’s property sector carries significant repercussions, given its substantial contribution, which accounts for approximately a third of the world’s second-largest economy.

Since 2021, the industry has been under severe strain following government measures to restrict borrowing by major real estate developers, leading to defaults by several prominent firms.

Official data released on Monday revealed a 9% decline in property investment in China for January and February compared to the previous year, with new construction starts plummeting by 30%, marking their steepest decline in over a year.

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