September 27, 2021
SHANGHAI (Reuters) – The Shenzhen government is investigating a unit of Chinese developer Evergrande, the city’s financial regulator told investors on Monday, in the first sign of an official investigation into the real estate giant’s asset management crisis.
Evergrande, the world’s most indebted real estate developer based in Shenzhen, owes $ 305 billion and is short on cash, triggering concerns that its troubles could flood China’s financial system.
As its liquidity crisis deepened, the company’s wealth arm missed a payment on Wealth Management Products (WMP) earlier this month, leading to protests from investors who fear they won’t get their money back.
In a letter to investors seen by Reuters, the Shenzhen Financial Regulatory Bureau said that “relevant departments of the Shenzhen government have gathered public views on Evergrande Wealth and are launching a thorough investigation into the company’s related issues.”
It also urges China Evergrande and Evergrande Wealth to work to reimburse investors, the letter said, which was sent following investors’ requests for an investigation.
Neither Evergrande nor the Shenzhen government responded to requests for comment.
China Evergrande, in common with other heavily indebted conglomerates, has issued high-yielding WMPs for investors, a popular way of borrowing that circumvents government lending restrictions.
More than 80,000 people – including Evergrande employees, their families and friends, as well as Evergrande property owners – have purchased WMP through Evergrande which has raised over 100 billion yuan ($ 15.47 billion) over the past five years and around 40 billion. yuan of investment is outstanding, said Evergrande Wealth sales manager and investors. [L4N2QM1U0]
($ 1 = 6.4662 Chinese Yuan Renminbi)
(Reported by Samuel Shen, Zhang Yan, and Brenda Goh; editing by Carmel Crimmins and Barbara Lewis)
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