Problems with Evergrande doesn’t seem to stop anytime soon as now Chief Executive Officer of the China Evergrande Group has resigned from the company.
According to media reports, Xia Haijun who was Chief Executive Officer and Executive Vice President of the director board of Evergrande was asked by the company to step down from the post.
Xia Haijun is currently undergoing an internal investigation by Evergrande group on the case of how deposits worth $1.99 billion were used as security pledge guarantees under Xia’s watch. Company and authorities are of the opinion that Xia Haijun was part of the financial scam which broken several security laws and at the end led to all the pledge deposits being seized by the banks.
Filings made by the Evergrande group with various government and regulatory authorities points out to the fact that resignation of Xia Haijun was directly connected to his alleged involvement in pledging the deposits as security.
Other than Xia Haijun, Chief Financial Officer of China Evergrande Group, Pan Darong also resigned due to involvement in the deal.
As CEO has resigned, an executive director of the company, Siu Shawn would be in charge of the post, said a statement.
The multibillion dollar property holding company also said that it would be issuing the report of their independent investigation as soon as the investigation is finished.
Started in 1996 by Xu Jiayin, China Evergrande Group, is one of the largest property developer and distributor in the most populated country in the world.
According to Fortune Magazine, Evergrande is 122nd company in the world in terms of profit and is also part of Fortune Global 500.
Evergrande Financial Crisis
In 2020, Chinese government and regulatory bodies decided to bring in new regulation which would restrict excessive borrowing and credit by Chinese business entities. The major business entities which got affected by the new rules regulations were businesses who are in the real estate.
With new rules in place regarding borrowing limits and similar restrictions, the real estate entities found it difficult to borrow. This has a domino effect on the asset-debt ratio of all the companies into property business.
By August 2021, Evergrnade started to face the heat of increasing debt and slowing down of revenue due to after effects of the pandemic. Along with this, actions of CEO and various other executive officers to pledge deposits as securities in banks brought the property giant to bring of completely running out of cash.
By January 2022, Evgrande had defaulted on various bonds inside and outside India and even got suspended from trading ion S&P Global for one day.
As of now, the company is undergoing serious reconstruction in its structures and along with that, several property constructions have already restarted.