A Chinese court sentenced the billionaire founder of Evergrande Group to life in prison on Thursday. The collapse of the real estate giant pushed China's financial system to the brink of collapse several years ago.
Evergrande founder and former chairman Xu Jiayin pleaded guilty to multiple charges in April this year, including fund-raising fraud, illegal use of funds and fraudulent issuance of securities.
According to a notice issued by the Shenzhen Intermediate People's Court on social media, the court found that between 2016 and 2021, Xu Jiayin and Evergrande Group conducted large-scale financial fraud and committed crimes such as illegal use of funds, fund-raising fraud, and illegal absorption of public deposits.
The court ordered the confiscation of Xu Jiayin's assets and imposed a total fine of 15.82 billion yuan on Evergrande Group and its subsidiary Evergrande Real Estate. Xu Jiayin appeared in court wearing a navy blue shirt with white hair. This was his first public appearance since disappearing from public view in 2023.
Evergrande was once China's fastest-growing real estate developer, but its bankruptcy in 2021 due to debts of more than 2 trillion yuan pushed China's financial system to the edge and exposed the fragility of the Chinese economy, especially its reliance on real estate as an engine of economic growth.
No other company played such a large role in China's eye-popping real estate boom, and its collapse marked the beginning of an ongoing crisis that is still affecting the entire economy today.
According to a social media notice issued by the court, the court found that Xu Jiayin was responsible for the operations of Evergrande Group and should be severely punished because his and the company's actions "seriously undermined the order of the socialist market economy."
The court said: "The amount of the crime was extremely huge, the circumstances were extremely egregious, it caused extremely heavy economic losses, and the harm to society was extremely serious."
In 1996, Xu Jiayin founded Evergrande Group in the southern city of Guangzhou. At that time, China was beginning to urbanize and a large number of people were moving from rural areas to cities. The company's success made Xu one of the world's richest men, and he later expanded his empire to include a football team and an electric car company.
But by 2020, Beijing was increasingly worried that the world's largest real estate boom was threatening the financial system as real estate companies like Evergrande borrowed heavily from local governments and banks. In an effort to cool the market, officials began to limit the amount of money developers can borrow, cutting off the funding that heavily indebted companies like Evergrande need to maintain day-to-day operations.
When Evergrande collapsed in 2021, much blame was pointed at Beijing. But in fact, the company had over-borrowed for years and had questionable accounting practices and poor supervision, which led to a series of unusual events, including the disappearance of $2 billion out of thin air.
