Xu Jain, chairman of real estate company Hengda, who was recently arrested by Chinese authorities, is reportedly being investigated for illegally transferring assets overseas. Regarding the Hengda incident, which became the epicenter of China’s real estate crisis due to the 2021 debt default, it is analyzed that the Chinese authorities have launched a full-fledged judicial process against those involved. The Wall Street Journal reported on the 1st (local time), citing an official familiar with the matter, that authorities are investigating whether Hengda founder Xu illegally transferred assets overseas. Earlier, on the 28th of last month, Hengda Group announced that “Chairman Xu was forced to take action in accordance with the law for allegedly violating the law” without giving a specific reason. Chairman Xu is not the only Hengda official who has been arrested by the authorities recently. Xu’s second son, Xu Tenghe, who served as the company’s financial manager, as well as some employees of Hengda’s financial subsidiary, Hengda’s finance subsidiary, and former executives of Hengda, were detained by authorities, local media reported. According to Bloomberg, “This series of moves indicates that the defaulted Hengda has entered a new phase with regard to judicial proceedings.” The move to resolve the crisis is moving beyond the economic response to the judicial process of those responsible.
As for Xu’s ex-wife, Ding Yumei, who is suspected of a “fake divorce,” Chinese media reported that she left Hong Kong for a third country in July. Ding Yumei divorced Xu last year, but reportedly stayed in Hong Kong and worked on the debt restructuring of Hengda Group. On the other hand, Hengda and Hengda Real Estate Services, which were suspended from trading at the end of last month, applied to the Hong Kong Exchange to resume trading, and trading resumed on the 3rd. The two companies have been suspended from trading since Aug. 28, when Xu was arrested. At that time, Hengda New Energy Vehicles, which was also suspended from trading, did not apply to resume trading. Hengda resumed trading at the end of August, 17 months after the stock trading was suspended in March last year. Just one month after the resumption of trading, trading in Hengda stock was halted again, causing the stock price to plummet by 19%, causing the market to panic. Hengda is trying to restructure its offshore debt worth $31.7 billion (about 42 trillion won), but it is not easy. Chinese authorities have ordered Hengda to suspend issuing new bonds. A meeting with foreign creditors scheduled for the end of last month was also postponed.
SOPHIA KIM
US ASIA JOURNAL
