Former real estate giant falls! Evergrande fraud case heard in Shenzhen, Xu Jiayin pleads guilty in court

China Evergrande Group’s fraud case was officially opened for trial on April 13 at the Intermediate People’s Court in Shenzhen, Guangdong Province. Founder Xu Jiayin and the defendant Xu Jiayin pleaded guilty in court to multiple criminal charges, including illegal fund absorption, fund-raising fraud, and fraudulent issuance of securities, among others. The court announced it would take the case under advisement for sentencing. The case is regarded as one of the largest and most closely watched corporate criminal litigation matters in China in recent years.

Evergrande Group faces multiple felony charges; Xu Jiayin pleaded guilty in court

Hong Kong 01 reported that the Shenzhen People’s Procuratorate brought the public prosecution in this case. The defendant units include Evergrande Group and Evergrande Real Estate Group Co., Ltd., while Xu Jiayin is being tried in his individual capacity. The two groups are charged with illegally absorbing deposits from the public, fundraising fraud, illegal issuance of loans, fraudulent issuance of securities, unlawful disclosure of important information, and bribery.

The charges facing Xu Jiayin personally are the most severe. In addition to the aforementioned crimes, he is also additionally charged with the illegal use of funds and embezzlement of duties. During the trial, the court presided over investigation and debate regarding the alleged facts between the prosecution and the defense. After the defendant units and Xu Jiayin completed their final statements, Xu Jiayin stated his guilty plea in court. Some representatives of the National People’s Congress, CPPCC members, relatives of the defendants, and representatives of those who participated in the fundraising also attended the hearing as observers.

From steelworker to China’s richest man, Xu Jiayin and the rise of the Evergrande empire

Xu Jiayin started out as a steelworker. With sharp business instincts, he founded Evergrande Real Estate in Guangzhou in 1996, which was later renamed China Evergrande Group. The group’s core strategy was “small floor area, low total price, and rapid capital recovery.” It expanded quickly from Guangzhou to major cities across the country and gradually diversified its business into areas such as tourism, health, culture, and new energy vehicles, building a business kingdom spanning multiple industries.

In 2016, Evergrande first entered the Fortune Global 500. In 2017, Xu Jiayin topped the Hurun Rich List China as China’s richest man with a fortune of about RMB 290 billion, becoming one of the most representative figures in China’s business community at the time.

Three red line policy sparks the fuse, a debt crisis of RMB 2.4 trillion

However, behind Evergrande’s rapid expansion was an extremely large debt structure that was difficult to sustain. In 2020, the Chinese government introduced the “three red lines” policy, strictly limiting real estate companies’ ability to borrow. Evergrande’s capital chain was immediately put under pressure. In the second half of 2021, the group successively exposed issues such as large-scale overdue bank acceptance bills and the suspension of redemptions for its wealth management product “Evergrande Wealth,” triggering protests nationwide from homeowners, investors, and suppliers.

In December of the same year, Evergrande announced that it could not fulfill its debt obligations, triggering what was the largest corporate debt restructuring case in China’s history. Media estimates put its total liabilities at nearly RMB 2 trillion, which further climbed to about RMB 2.4 trillion by the end of 2022. In January 2024, the High Court of Hong Kong ordered Evergrande to liquidate immediately. In August of the same year, Evergrande’s shares were formally delisted from the Hong Kong Stock Exchange, bringing the era of a real estate giant to an end.

(A byword for China’s unfinished homes: Evergrande Group formally announced it will be delisted from the Hong Kong Stock Exchange)

Looking across millions of unfinished homes, the Evergrande case sounds a warning bell for China’s housing market

In September 2023, Chinese authorities took coercive measures against Xu Jiayin on suspicion of multiple financial crimes, and Evergrande’s official statement confirmed the news the next day. In March 2024, the China Securities Regulatory Commission announced administrative penalties against Evergrande Real Estate, proposing a fine of RMB 4.18B and a fine of RMB 47 million against Xu Jiayin, while also imposing measures such as a lifelong ban from entering the securities market.

Xu Jiayin was also accused of allegedly transferring a large amount of assets overseas and carrying out large-scale Ponzi-scheme-style financing activities through Evergrande Group. With the completion of this trial procedure, the court will issue formal rulings on the various charges at a later date.

The Evergrande fraud case is not only a criminal case, but also reflects the structural risks in China’s real estate industry for a long time—namely, its reliance on high leverage and high debt. The chain reaction in the real estate industry triggered by Evergrande’s collapse once spread to upstream and downstream suppliers, homebuyers, and financial institutions. Today, the millions of unfinished homes across China have also become the biggest lesson left by an entire generation of real estate giants for future generations.

This article Yesterday’s real estate tycoon fell! Evergrande fraud case heard in Shenzhen; Xu Jiayin pleaded guilty in court was first published on Lianxin News ABMedia.