“Hui Ka Yan, founder of Evergrande, was the archetype of China’s 2000s–2010s Gilded Age tycoon: enormous corporate leverage alongside enormous personal wealth, political access, trophy assets, philanthropy and prestige projects,” said Han Lin, China Country Director, The Asia Group.
“He became such a politically potent symbol in China: the image of a developer living extraordinarily well while a highly leveraged company owed money to homebuyers, suppliers, employees and creditors was almost perfectly contrary to Xi Jinping’s emerging “common prosperity” and financial-risk-control agenda.”
Here’s the full transcript:
–
Han: Oh, absolutely. Hui was the archetype of China’s Gilded Age tycoon, someone with enormous corporate leverage alongside personal wealth, political access, trophy assets and prestige projects, including a football team.
BBC: and now a life in prison. He is accused or was accused, I see, from the court of serious, among other things, seriously disrupting the socialist market economic order. I mean, how far was he and Evergrande, do you think key in terms of the tremendous debt problems that China and particularly China’s middle classes have been struggling with?
Han: So what is important to understand is Hui has become a politically potent symbol in China. He is the image of a developer living extraordinarily well, while a highly leveraged company that he manages owes money to homebuyers, suppliers, employees and creditors. Almost contradictory to President Xi Jinping’s idea of a “common prosperity” and financial-risk-control agenda.
BBC: How far do you think people in China have separated, though, these sort of — I’m sure he became a bit of a sort of hate figure, but the idea that there were sort of bad apples who were borrowing and borrowing to sort of keep on expanding this sort of, this unsustainable, debt-fueled property boom and the idea that, well, you know, maybe the people in charge in Beijing were not doing enough to manage this.
Han: So one thing that’s worth noting is that at one point, property made up almost 30% of China’s economy. And with the fall of the property sector, including that of many property developers, a lot of people felt like their main source of net worth, their property, as it fell in price, they started losing confidence in the future. And because of that, it continues to have a legacy where consumption growth is slow and the economy just really isn’t the engine of growth it used to be.
BBC: So that that cascade of defaults and the property slump, you’re saying it’s still weighing on China’s middle class?
Han: It continues to weigh on the middle class and it continues to be a conundrum for the government that’s wondering, “how do you boost everyone’s confidence into the future?” So at this point, the property sector, it hits everyone at the most personal level of what your net worth is worth today. And it looks like it’s worth less today than it used to be. And that’s disheartening.
BBC: And just to return to Hui Ka Yan, his story now is at an end. Are there other property magnates, big fish whom you think may be netted yet by the judicial system?
Han: So what it’s become clear is that, all the other major property companies, such as Vanke, such as the others, essentially have basically submitted to government oversight. In other words, the idea of a private enterprise taking on so much leverage at the cost of China’s future, that looks like those days have ended.