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China Evergrande downplays impact of staff arrests in Shenzhen, as property management unit warns on debts

Hamartia Antidote

Nov 17, 2013
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  • Police in China have detained – for the first time – a number of employees at China Evergrande Wealth
  • Meanwhile Evergrande Property Services, the property-management affiliate of China Evergrande Group, warns on debts

China Evergrande has reassured on the detention of staff by police.

Indebted property giant China Evergrande said that the arrest of certain members of staff from its insurance unit Evergrande Wealth Management would have no impact on its operations, according to a filing by the property developer with Hong Kong Exchanges and Clearing (HKEX).

Meanwhile Evergrande Property Services, the property-management affiliate of China Evergrande Group, said it remains uncertain whether it can meet its debts in the next 12 months after securing 13.4 billion yuan (US$1.84 billion) in loans for the embattled developer, according to a separate exchange filing on Monday.
China Evergrande said that the detention of personnel from Evergrande Wealth Management, its wholly-owned subsidiary, “will not affect the company’s operations”.

Police in China detained – for the first time – a number of employees at China Evergrande Wealth two weeks after the group again failed to make payments on its investment products.

Police in the city of Shenzhen in the southern province of Guangdong, where the cash-strapped developer is headquartered, said at the weekend that they had detained employees from Evergrande Wealth Management, including a person surnamed Du. Du Liang is the unit’s general manager but it is not known if he is among those detained.

Meanwhile, Evergrande Property Services warned on its debts – specifically a pledge guarantee it made to obtain loans, whose proceeds China Evergrande has used for its own operational purposes, including a 9.75 billion yuan loan to redeem an offshore bond in February 2021.

“The group has incurred significant losses as a result of the ‘13.4 billion yuan deposit pledge’ incident,” said Duan Shengli, Evergrande Property Services chairman. “The Group’s ability to continue as a going concern is dependent on having sufficient working capital to meet its financial obligations as they fall due over the next 12 months.”

“However, subject to the liquidity crisis of the related party, the group’s recovery of such losses is subject to material uncertainties and the company will keep the market informed of any progress in a timely manner by way of further announcements,” Duan added.

In August, the trading of shares in China Evergrande resumed on the Hong Kong bourse following a filing by the developer that it continued to engage with Evergrande Property Services regarding the payment of the loan.

Aside from the loans extended to China Evergrande, Evergrande Property Services’ financial position improved with net profit attributable to the owners of the company rising by 43 per cent to 781.3 million yuan in the first half of 2023 from a year ago, according to the filing issued on Monday. Revenue was up 5.2 per cent to 6.14 billion yuan in the period.

As of June 30, total bank deposits and cash rose by 16.5 million yuan to 1.67 billion yuan owing to the “increase in the net cash inflow generated from operating activities of the group during the period”.

Net current liabilities, meanwhile, declined by about 24 per cent to about 2.525 billion yuan, Evergrande Property Services said. Its shares closed 5.5 per cent lower at HK$0.69 in Hong Kong on Monday.

According to the filing by China Evergrande on the arrested staff, the detained suspects were subject to “criminal coercive measures”, a term that usually refers to detention or restriction of movement.

China Evergrande also said that the reported takeover of Evergrande Life Insurance by Haigang Life Insurance, a new state-owned insurer, “has no significant impact on the company’s current business operations”.

Evergrande Life is 50 per cent owned by China Evergrande. The developer’s shares slumped by 1.61 per cent to HK$0.61 apiece on Monday in Hong Kong, before the filings were made.

Evergrande chairman under police watch; liquidation risk mounts​

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Evergrande has U.S. $300 Billion in assets. Liquidation will be a major event.


The embattled developer’s stock closed down 19% at 32 Hong Kong cents (4 US cents), putting its market cap at just 4.2 billion Hong Kong dollars ($539 million). The slide took this week’s losses to 42%. The company has lost 99.9% of its value since peaking in October 2017.

China's largest builder and real estate company is worth only as much as a vaporware startup in Silly Valley.
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