According to the US media, the collapse of Evergrande Group is not a simple debt problem, but a series of serious problems caused by problematic accounting methods and poor corporate supervision.
Over the past few decades, Evergrande Group has expanded incredibly into China's real estate market, and its success has made its founder, Xu Jiayin, one of the richest people in the world.
However, as China's property market cooled and developers were restricted from obtaining loans, Evergrande lost the cash it needed to operate.
The collapse of Evergrande Group has had a wide impact, from home buyers to ** merchants and banks. The company pre-sold a large number of unbuilt apartments, took a lot of money from ordinary families and company employees, but was ultimately unable to repay the debt. This has led to a multi-stakeholder battle to find a way to recover what is owed.
With Evergrande defaulting, a domino effect sparked defaults by other developers, leaving behind unfinished sites, angry home buyers, and builders who were owed money. However, as Evergrande Group struggled to raise capital, its poor corporate governance and behavior gradually came to light in the public eye.
Evergrande's collapse has sparked concerns about an overheated Chinese property market and accusations of over-borrowing and bad behavior by developers. While trying to control the real estate market, developers have found ways to bypass the restrictions. Eventually, a policy made it harder to borrow and pushed developers to the brink.
After Evergrande defaulted, the reliability of its accounting methods and financial reports was questioned. PricewaterhouseCoopers resigned and said it could not get the job done, and the Hong Kong Accounting and Financial Reporting Board announced two audits of Evergrande's books. According to the audit results of Shanghui ParkerBon Accounting Firm, Evergrande lost a total of 812 billion yuan in 2021 and 2022, while the company announced a net profit of 8 billion yuan in 2020. The new audit also found clues that Evergrande had been treating the money received by the ** apartment as income, even though the apartment had not yet been built when the money was received. In addition, the staff of Evergrande's wealth service department were detained, and the company was unable to pay the month's payment. The former president and former chief financial officer of Evergrande and the former chairman of Evergrande's life insurance division were also taken away. Eventually, Evergrande announced that it needed to re-evaluate its assets and canceled the restructuring deal, and a few days later Xu Jiayin was taken under control.
Overall, Evergrande's collapse was triggered by a series of serious problems caused by questionable accounting methods and corporate misregulation. This has not only affected various aspects such as home buyers, merchants and banks, but also raised concerns about the overheating of China's property market and the behavior of developers.
With Evergrande's default and domino effect, other developers have also defaulted, leaving unfinished sites and parties in arrears. However, as Evergrande Group struggled to raise capital, its poor corporate governance and behavior gradually came to light in the public eye. In the end, the policy made it more difficult to borrow and pushed developers to the edge of the cliff.
According to documents submitted by Evergrande Group, since the company went public in 2009, Xu Jiayin has paid a total of more than $7 billion in dividends to himself and his wife. Two people who have direct knowledge of the company's situation but are not authorized to be interviewed revealed that Xu Jiayin has told the outside world that he and his wife have been divorced for at least two years. Evergrande confirmed in a filing in August that he and his wife had divorced. However, regarding the assets that have been transferred to the ex-wife, it is expected to lead to a series of disputes.
Two years after Evergrande's default, many questions remain unanswered: how to effectively liquidate the company, how much assets are left for distribution, and who will ultimately own them. These issues involve many stakeholders, including creditors, shareholders, employees, etc., and these people are closely watching Evergrande's follow-up treatment.