Since China Evergrande, Evergrande Property, and Evergrande Auto became insolvent, Evergrande Life has now been taken over, the former chairman has lost contact, Evergrande Wealth has been put on file, and the current general manager has been arrested on suspicion of committing a crime. The territory of the Evergrande Empire collapsed one by one. Evergrande Wealth currently has 34 billion in unpaid funds. These investors, like many previous suppliers and owners, have become victims after Xu Jiayin’s myth of wealth creation was shattered.
Another financial executive related to Evergrande had an incident.
According to reports from many media including Blue Whale Finance, Zhu Jialin, the former chairman of Evergrande Life and now the acting chairman of Zhongrong Life, was taken away on September 17 and is currently out of contact. This matter may be related to Evergrande.
Public resumes show that in 2017, Zhu transferred from his position as vice president of CITIC Bank to work under Xu Jiayin and served as president of Evergrande Financial Group. In 2018, he served as chairman of Evergrande Life Insurance. In September 2019, Zhu resigned as chairman and director of Evergrande Life Insurance.
Before Zhu Jialin disappeared, Evergrande Wealth General Manager Du Liang and others were suspected of committing crimes and had been subject to criminal coercive measures by the Shenzhen Public Security Bureau.
The public security agency gave several ways to report the case in the report, which was a glimmer of hope for Song Xiao, who bought Evergrande Financial Management. Prior to this, Song Xiao, who had been unable to get the payment, had been asking for help, "I can't contact Evergrande Wealth, and no one cares."
"Since the mine exploded, it has stopped functioning normally."
Evergrande employee Guo Shuo told "City Circle", "Evergrande Wealth has not been operating normally since the thunderstorm in 2021."
Evergrande Wealth, formerly known as Evergrande Financial Services Group, was established in November 2015 and is a wholly-owned subsidiary of Evergrande Group. Evergrande Financial Services was launched in March 2016, when P2P was prevalent across the country. Evergrande Financial Services is the P2P platform under Evergrande Group. Since 2018, many P2P platforms across the country have exploded, and the industry has been comprehensively rectified. Evergrande Financial Services products were subsequently removed from the shelves, and on May 30, 2019, it was announced that it would be renamed Evergrande Wealth.
After moving offline, Evergrande Wealth is still selling so-called financial products. These financial products are sold to the construction parties, owners and even employees of Evergrande Real Estate in the name of "supply chain finance". Since the final asset targets of these financial products are mostly projects under construction by Evergrande Group, Evergrande Wealth’s financial products have also experienced redemption problems since the explosion of Evergrande Group in 2021, which eventually led to the explosion.
On the evening of September 16, the "Shenzhen Nanshan Public Security Bureau" announced that recently, the public security organs have taken criminal coercive measures against suspected criminals such as Du from Evergrande Fortune in accordance with the law.
"City Circle" learned from multiple people close to Evergrande that Du is Du Liang, the legal representative and general manager of Evergrande Wealth. Du Liang, majored in "Forest Resource Protection and Recreation" in college. Before switching to Evergrande in 2012, he worked as a deputy human resources manager in a hotel for 6 years. One year after serving as the deputy manager of human resources at Evergrande, in 2013, Du Liang was appointed as the general manager of the Henan Branch of Evergrande Agriculture and Animal Husbandry Group. Three years later, Du Liang was appointed as the general manager of Evergrande Wealth.
In the financial industry where the Qing Dynasty and Northern China have resumed diplomatic relations, Du Liang's resume is really lackluster. But it was just such a person who served as the top leader of Evergrande Fortune for five years. What is his "charm"?
Liu Jinwei, a senior financial professional, said: "If Du Liang gains Xu Jiayin's trust, he does not need advanced financial knowledge." He explained to the "market circle" that product managers can do the business of Evergrande Wealth. Contracts are standardized, and each contract is basically the same. It’s just that the terms are different and the benefits are different. "Evergrande Wealth is a channel for Evergrande Group to raise funds. It requires a person with executive ability. Moreover, this person must have unlimited trust and loyalty to Evergrande. Then, this person will bring this atmosphere to Evergrande Wealth, so that internal employees can also identify with it."
"Daily People" reported: "Evergrande Fortune will convey a point of view to employees: Evergrande Fortune is the department that provides blood transfusion to Evergrande. Evergrande needs them to provide money. Moreover, Evergrande Fortune is also a wholly-owned subsidiary of Xu Jiayin and will be responsible for Evergrande Fortune. Employees of Evergrande Fortune really have a sense of belonging to Evergrande."
As the gatekeeper of Evergrande's wealth, Du Liang's behavior is a bit "guarding and stealing". Du Liang admitted to the outside world on September 12, 2021 that he did cash in related financial products before Evergrande Wealth exploded, and the reason for cashing in early was because of a family emergency. It has also been exposed on the Internet that Du Liang and his father's four transactions totaling more than 10 million yuan of investment have been fully paid in advance.
Du Liang is suspected of committing a crime. What crime did he commit? According to the Shenzhen Business Daily, it was learned from people familiar with the situation that Evergrande Wealth was suspected of illegal fund-raising in the process of developing its business. The so-called "illegal fund-raising" refers to the act of raising funds from the public or collectives by using fraudulent methods for the purpose of illegal possession.
According to the "Main Results of Internal Control Assessment and Review of Certain Issues Raised by the Former Auditor" released by China Evergrande, as of December 31, 2022, Evergrande Wealth's unpaid principal and interest was 34 billion yuan. This has plunged investors in Evergrande Wealth into endless pain.
"Evergrande cuts leeks and treats them equally"
Wang Jing bought two financial products from Evergrande Wealth before it exploded, one for 200,000 yuan and one for 400,000 yuan. According to the original payment plan of 8,000 yuan per month, I should be able to get back more than 200,000 yuan now. But now two years later, she has only gotten back less than 100,000 yuan.
Just because Evergrande Wealth has repeatedly lowered the payment plan, from 8,000 yuan per month starting in March 2022 to 2,000 yuan per month starting in November 2022. Until May 31, 2023, Evergrande Wealth changed the payment plan for the third time. "The reason was that the company's capital withdrawal situation was not ideal and it could not be redeemed according to the original standard of 2,000 yuan per month." According to the Securities Times, Evergrande Wealth investors broke the news that in May this year, 467 yuan was redeemed, in June 458 yuan was redeemed, and in July it was 195 yuan, until it was announced in August that it could not be redeemed.
"City Circle" learned that it has been more than two years since Evergrande Wealth started the redemption process. Investors with small amounts of about 100,000 yuan have basically completed their redemptions, while large amounts are still far away.
But the executives of Evergrande Wealth paid the money first. On September 18, 2023, multiple former and current employees of Evergrande told “City Circle” that Evergrande Wealth’s executives had all paid up.
Before Evergrande's wealth exploded, in addition to Du Liang's early redemption, a group of executives who bought Evergrande's wealth management products also jumped out of the fire pit in advance.
According to a report by "Henan Business Daily" on September 15, 2021, relevant evidence provided by investor Li Qiang showed: "Xu Jiayin's wife Ding Yumei's payment of over 23 million has been completed. 9 of the funds invested by Evergrande Wealth Chairman Du Liang and his father Du Mou The principal and interest of 900,000 yuan invested by Tang Fajun, a senior executive of Evergrande Fortune, have been paid off. The principal and interest of 300,000 yuan and 500,000 yuan invested by Evergrande executives Li Wenting and Wang Canran have also been paid in advance.”
However, in the early morning of October 9 that year, Evergrande Group’s official website issued a statement stating that six managers who had redeemed Evergrande’s wealth products in advance had returned their funds.
In any case, Evergrande Wealth still has approximately more than 30 billion yuan of unpaid principal and interest, involving nearly 100,000 investors. Among the 100,000 investors, there are Evergrande employees, Evergrande project construction parties, and Evergrande project owners. Many of the Evergrande employees who were most deeply bound failed to get their principal. Evergrande Group once issued sales assessment tasks internally and mobilized employees to purchase products themselves or sell to relatives and friends around them. Before Evergrande Wealth broke the news, an Evergrande Wealth executive revealed at an internal meeting that the number of Evergrande employees who purchased Evergrande Wealth products reached tens of thousands.
"Do you think they still distinguish between themselves and outsiders? They are just leeks." Guo Shuo said angrily. Guo Shuo is a current employee of Evergrande. He spent all his money to buy Evergrande financial products worth 900,000 yuan. Nowadays, Guo Shuo has not been able to get the money. Although he is an employee of Evergrande, he has no way to ask for help. When he thinks of this, he can't sleep all night.
Where did Evergrande Wealth’s money go? Typically, a wealth management company will diversify its funds into different asset classes and areas, such as stocks, bonds, real estate, private equity, etc., in order to reduce risks and pursue higher returns. However, it is obvious that "Evergrande Wealth serves as Evergrande's own financing platform, and its funds are mostly within the Evergrande system. The specific investment destination needs to be determined based on the market environment at the time and the decision-making of the investment team." IPG China Chief Economist Bai Wenxi told "City Circle".
According to reports, Evergrande Wealth’s wealth management products form a “fund pool” that is uniformly deployed by Evergrande Wealth.
Does it really not affect Evergrande’s operations?
Evergrande Wealth, because Du was arrested on suspicion of a crime, the mess was beyond repair. In addition, Xu Jiayin’s other “money bag”, Evergrande Life Insurance, was recently taken over by Harbor Life.
Evergrande Life was established in 2006, formerly known as Sino-Singapore Great Eastern Life. It was a joint venture between Singapore Great Eastern Life and Chongqing Real Estate Group. In 2014, Sino-Singapore Great Eastern made equity adjustments. The following year, in order to raise funds, Xu Jiayin set his sights on the insurance industry, acquiring 50% of the equity of China-Singapore Great Eastern Life for 3.939 billion yuan, and changed its name to Evergrande Life. After Xu Jiayin took over, Evergrande Life sold universal insurance crazily, absorbing large amounts of funds from the market at extremely high interest rates, and became the "money bag" of Evergrande Group.
In order to cover the high interest costs on the liability side, Evergrande Life took desperate risks in A-shares and successively listed listed companies such as Jinke Shares, Yongding Shares, and Jingyuntong. In 2017, Evergrande Life's premium income reached 28.1 billion yuan, which was several times higher than the same period last year. In 2018, Evergrande Life's business growth slowed down and then became low-key. With the explosion of Evergrande Group in 2021, Evergrande Life cannot escape the fate of insolvency. After failing to release an annual report for two consecutive years, Evergrande Life was taken over by Harbor Life in 2023.
Do the two incidents really have no impact on Evergrande’s main business?
In Bai Wenxi's view, the first thing that bore the brunt of the case against Evergrande Wealth was the collapse of market confidence. "Evergrande Wealth is the wealth management platform under Evergrande Group. Being investigated may cause investors and consumers to have doubts about Evergrande's operating conditions and financial stability, which will in turn affect its already severely damaged market reputation and confidence, which is extremely detrimental to Evergrande's restructuring."
The progress of Evergrande's debt restructuring is still limited to an announcement made by Evergrande on September 8 this year. The announcement stated that the approval hearings on its Jingcheng Arrangement, Cayman Islands Evergrande Arrangement, Hong Kong Evergrande and Tianji Arrangement were postponed to 10 pm on October 3, 11 pm on October 5, and 10 am on October 16 and 17 respectively. At the same time, Evergrande Group issued a hearing postponement notice to creditors through the relevant website, stating that the hearing on the approval of Evergrande Group’s overseas debt restructuring, originally scheduled to be held in the Bankruptcy Court for the Southern District of New York on September 20, has been postponed to 11 a.m. Eastern Time on October 25.
On April 3, 2022, China Evergrande issued an announcement on overseas debt restructuring, making different restructuring arrangements based on different bond-issuing entities such as Evergrande Group and its subsidiaries Jingcheng Company and Tianji Company.
"The filing of a case against Evergrande Wealth will cause banks, trusts and other financial institutions to be cautious about Evergrande's credit rating determination." Bai Wenxi told "City Circle". Citigroup released a research report saying that although China Evergrande continues to take measures to deal with debt and liquidity pressure, its operations may still face major challenges given its huge liabilities. The bank lowered the target price of China Evergrande by 61.5% from HK$1.3 to HK$0.5 and maintained a "sell" rating. At the same time, Citigroup expects losses of 59.8 billion yuan and 20.6 billion yuan respectively in 2023-2024, and a profit of 1.483 billion yuan in 2025.
The capital market reacted quickly. Previously, because the government successively introduced policies to stimulate the property market such as "recognizing houses but not loans" and lowering mortgage interest rates, real estate stocks exploded collectively. China Evergrande also rose sharply for several days in a row, with its stock price as high as HK$1.86. However, affected by the incidents of Evergrande Wealth and Evergrande Life, its stock price had plummeted to HK$0.51 as of noon on September 19.
▲(Evergrande stock price chart. Source/Flush)
"Being filed for investigation will also attract the attention and investigation of regulatory agencies, which will lead to increased regulatory pressure and may impose stricter requirements and restrictions on Evergrande's business and operations." Bai Wenxi believes.
Guo Shuo will always remember the promise that Boss Xu made to the investors of Evergrande Wealth on September 10, 2021: "I can have nothing, but investors of Evergrande Wealth cannot have nothing." Now, as China Evergrande, Evergrande Property, and Evergrande Auto become insolvent; Evergrande Life has been taken over, and Evergrande Wealth has been filed, how should Xu Jiayin fulfill his promise?
"I really don't want to have nothing!" Guo Shuo said.
(Guo Shuo, Wang Jing and Song Xiao are pseudonyms in the article.)