China’s Evergrande Group Fined $581 Million for Falsifying Revenue
China’s securities watchdog has fined the troubled property developer China Evergrande Group a whopping 4.2 billion yuan ($581 million) for allegedly falsifying its $78 billion revenue. This case could potentially be one of the largest financial frauds in history.
In a statement released on Monday to the mainland stock exchanges, the company revealed that its president, Hui Ka Yan, had been fined 47 million yuan ($6.5 million) and banned for life from Chinese markets. Hui, also known as Xu Jiayin, was detained by authorities in September for alleged “illegal crimes.”
The China Securities Regulatory Commission (CSRC) has issued a preliminary decision, appointing industry veteran Wu Qing as its new chief, known for being tough on market misconduct.
The allegations against Evergrande include overstating its revenue in 2019 by 214 billion yuan (nearly $30 billion) and by nearly 80% in 2020, totaling over $78 billion in false income. The CSRC also suspects issues with bonds issued by Evergrande.
Former executives such as Xia Haijun and Pan Darong have also been fined and banned from the market. Evergrande’s alleged fraud surpasses scandals from companies like Luckin Coffee and Enron, dealing a significant blow to its former auditor, PricewaterhouseCoopers LLP, and China’s financial supervision.
The fine raises concerns about the extent of accounting problems in China, as the new chairman of the CSRC seeks to tighten supervision. With Evergrande already facing liquidation in Hong Kong, the company will have even less money to pay its international creditors.
The collapse of Evergrande and other Chinese companies stems from official pressure to reduce excessive debt, threatening the country’s economy. Regulators are now working to reassure investors after market plunges in the wake of the real estate crisis. The Shanghai Composite index remains below its level from a year ago, and Hong Kong’s Hang Seng has also fallen.
The repercussions of the real estate crisis have impacted China’s shadow banking sector, adding further challenges to the country’s financial landscape. (With information from AP and Bloomberg)