Chinese authorities detained some staff of China Evergrande Group’s money management business, a sign that the saga around the defaulted developer at the heart of the nation’s property crisis has entered a new phase involving the criminal justice system.
Police in the southern city of Shenzhen said the actions were taken “recently” in a statement on social media Saturday night. They only identified one of the detainees by the last name Du. No charges were disclosed and the statement didn’t say how many people were in custody.
Evergrande Financial Wealth Management Co., based in Shenzhen, is a wholly-owned Evergrande unit established in 2015. The firm’s general manager is Du Liang, according to his Linkedin profile. Bloomberg News wasn’t able to verify that he is among the detainees.
Evergrande sits at the center of a credit crisis that has rippled through China’s real estate sector and curtailed growth in the world’s second-largest economy. The debt-laden developer has offloaded a range of assets, including trophy land parcels and stakes in other financial institutions.
Evergrande missed payments on 40 billion yuan ($5.6 billion) of wealth management products in 2021, sparking nationwide demonstrations and putting pressure on Beijing to find a solution to avoid further unrest. More than 70,000 people had bought the products, including many Evergrande employees, as the cash-strapped developer tapped them for funding.
The money management arm of Evergrande said Aug. 31 that it couldn’t make payments due on investment products because of a liquidity crunch.
Police said Saturday that the investigation into the wealth management unit is ongoing and called on investors to provide leads to the authorities, including filing complaints online.
China Evergrande is undergoing the country’s biggest restructuring ever, and the protracted process remains in limbo as key votes on its offshore-debt revamp plan were further delayed to October.
The latest development came as the government set up a joint venture to take over China Evergrande’s insurance arm. State-backed Hai Gang Life will run Evergrande Life Assurance Co., according to notices issued by the National Administration of Financial Regulation on Friday.
(Adds more details and background of the Evergrande crisis.)