Finally, the China Securities Regulatory Commission (CSRC) fined the Chinese real estate giant Evergrande with US$576 million for fraudulent business practices. This was officially announced this Friday by the authorities of the organization.
The case addressed the investigation of the fraudulent issuance of offered bonds publicly by the company in the real-estate market. The CSRC also announced a fine of US$6.5 million to the founder of Evergrande, Xu Jiayin – also known as Hui Ka Yan-, which will have Banned for life from accessing the stock market.
China vs the real estate giant
“Between 2019 and 2020, Evergrande Real Estate fraudulently increased its revenues and profits by prematurely recognizing revenueswhich resulted in the fraudulent bond issuance offered publicly in the exchange market,” the CSRC detailed in a statement.
Evergrande was China’s largest real estate company and helped the country’s rapid economic growth over the past decades. However, their huge debt turned the company into a symbol of the long crisis of the Chinese real estate sector.
According to the complaint, Evergrande says regulators discovered that the firm exaggerated its income in 2019 at 214 billion yuan (almost US$30 billion). In 2020, they allege their revenue was overstated by almost 80%, or 350 billion yuan ($48.6 billion). In total, it reaches more than US$78,000 million of false income.
In addition, the CSRC also announced a fine of US$6.5 million to the founder of Evergrande, Xu Jiayin, also known as Hui Ka Yan. The businessman will also be banned for life from accessing the Stock market.
Problems in the real estate market
The government of Xi Jinping has been dealing with various problems in the real-estate market. In May, the Chinese government launched a measure – aligned with its plan for everyone to have a home – to try to contain consumer discontent. investors who do not see nearby possibilities, many of them already scammed by various developers.
One of the last measures of the ruling party consisted of reduce the amount of the initial deposit to buy a home and the regime is considering purchasing commercial real estate, in an attempt to support the real estate market in the midst of the crisis. For boost this industry and ensure that millions of empty homes go to those who need them, the authorities called a meeting with regulators, representatives of major banks, local governments and of real-estate market.
“In cities where there is a large inventory of commercial housing, the government may order and purchase some of the commercial housing at reasonable prices, as appropriate, for use as affordable housing,” the deputy prime minister reported. He Lifeng at the meetingquoted by state media on May 17.
Currently, the initial deposit to buy a home is reduced to 15% of its valuewhile to buy one second home the rate will be 25%. According to official media, this is one of the lowest rates in the history of the country.
The real estate sector represents more than one quarter of Chinese Gross Domestic Product (GDP) but currently experiencing an unprecedented crisis, which started in 2020, when authorities restricted access to credit for builders in an attempt to reduce mounting debt. Since then, large real estate companies such as Evergrande or Country Garden are in crisis and Falling prices are convincing the Chinese to invest in property.
Source: Ambito
