From the outside, Xu Jiayin seems to be an ordinary businessman. No one could have imagined that this seemingly mild-mannered old man actually controlled one of China's largest real estate empires, Evergrande Group, and was also the main culprit in this debt crisis. This crisis involves the rupture of trillions of capital chains, and hundreds of thousands of owners are facing the risk of unfinished real estate, which directly leads to the real estate industry falling into a cold winter, and also makes many institutions that have business dealings with Evergrande worse.
The magnitude of the shock of this chaos is so large and the scope of the impact is that it is by no means possible for Xu Jiayin to achieve it alone. After he was arrested, in order to avoid drinking elixir, Xu Jiayin chose to confess to the two ** organizations behind the scenes that had helped him for a long time, which revealed more secrets behind the Evergrande crisis.
The impact of this crisis on China's economy and people's livelihood has been far-reaching and devastating. Specifically, there are the following aspects:
First, Evergrande Group itself 24 trillion huge debt. This money is not only related to the life and death of Evergrande itself, but also affects the operation of upstream and downstream partner enterprises. A series of thunderstorms by a real estate company that has inflated its stock price and has a high debt ratio will inevitably trigger systemic financial risks.
Second, the overall cooling of the real estate market. Under the superimposed impact of the Evergrande crisis and the tightening of housing loans in many places, many potential real estate buyers have canceled their home purchase plans. Real estate market transactions have entered a freezing point, which has a huge impact on related upstream and downstream industries.
Third, hundreds of thousands of property owners are at risk of failing to complete their properties. Evergrande Group alone has more than 70 projects under construction that have been scaled back or even halted, putting more than 1 million owners at risk of not being able to deliver their homes. The vital interests of these ordinary home buyers have been seriously harmed.
Fourth, a number of banks, trust companies, ** chain enterprises and other institutions that have business dealings with Evergrande are facing the pressure of declining performance and even bankruptcy liquidation. The crisis has spread and the blow to the entire economic system has been on all fronts.
Xu Jiayin can cover the sky with one hand, and it is not only the collusion between politics and business behind it. PricewaterhouseCoopers and a number of rating agencies have long been the "financial technology" of Evergrande Group, which is also indispensable.
Since 2009, PwC has been a long-term partner of Evergrande Group's overseas capital market audits. The globally influential accounting firm charges Evergrande up to $40 million a year for its audits. However, it has long cooperated with Evergrande's financial report fraud, including:
1) Concealment of large contingent liabilities. Evergrande has many projects with contingent liabilities of up to 1 trillion yuan, and PricewaterhouseCoopers did not mention this in the report.
2) Concealing the true nature of the M&A transaction. Evergrande has repeatedly acquired related companies to inflate the scale of assets, and PricewaterhouseCoopers selectively ignored this kind of fraud.
3) Issuing erroneous audit opinions. When it was clear that Evergrande was unable to repay its debts, PwC still issued a standard unqualified audit report for it.
In the eyes of many domestic rating agencies, Evergrande's credit has always been excellent and the risk is controllable. This is very different from the judgment of international rating agencies.
For example, in 2015, when Evergrande's debt was as high as 500 billion, Standard & Poor's rated it as a junk B-. However, domestic rating agencies such as China Chengxin, Dagong International, and United Credit still give it the highest credit rating of AAA! This is undoubtedly aiding and abetting abuse, providing a credit endorsement for Xu Jiayin's continuous borrowing.
It can be said that without the credit support of these rating agencies, Xu Jiayin would not have been able to continue to borrow heavily; If Pwis hadn't given the green light to Evergrande's financial fraud, the outside world would have seen through the truth earlier, and the crisis would not have been as serious as it is today. Behind these two "systemic" scenes, we must bear unshirkable responsibility for this!
After uncovering these two major organizations, we have reason to believe that Xu Jiayin did not monopolize Evergrande. In this era of moral decline that is blooming everywhere, evading supervision and violating laws and regulations have become the "standard configuration" of some institutions and individuals.
We must face up to this reality of our time. In terms of preventing and controlling similar systemic financial risks, it is no longer realistic to rely solely on personal ethics and the regulatory role of the so-called "gatekeepers", and it is necessary to strengthen constraints at the institutional and technical levels, so that illegal operations have nowhere to hide and cannot be sustained.
Finally, is there more hidden ** behind this crisis? How do we further detect and sanction them? All of this requires the concerted efforts of all sectors of society and long-term vigilance. It is still too early to say whether the ending will be successful, but the direction of the road ahead is already clear.