The Chinese Evergrande group is struggling with a whole series of problems, and now there is a new one: As the company announced, Liu Yongzhuo, the vice chairman of Evergrande’s electric car division, was arrested by the police.
The company’s subsidiary, China Evergrande New Energy Vehicle, announced the manager’s arrest on Monday in a statement to the Hong Kong Stock Exchange. It is therefore “about suspicion of illegal crimes”, no further details were given. The company’s shares had previously been suspended from trading.
The heavily indebted Evergrande Group is considered the largest real estate developer in China. The electric car division was founded four years ago in order to develop another business area in addition to the core real estate business – so far without any significant success. The group has been the focus of investigations for a long time. According to media reports, the group’s CEO, Hui Ka Yan, was had already been placed under police protection in the fall.
Shares fall by a quarter
At the weekend it became known that the Zhongzhi Group, a large shadow bank in China, was in financial distress. The company had lent billions to real estate developers. Zhongzhi has been unable to pay off his debts for a long time and has now filed for bankruptcy.
Thanks to cheap loans, Chinese real estate developers had expanded for years and thus contributed a significant part to the economic growth of the People’s Republic. But since the Chinese government has cracked down on excesses in the real estate sector, many property developers have gone out of business or are struggling to survive. This creates uncertainty among consumers and thus inhibits the growth of the Chinese economy.
The news about the arrest of Evergrande’s top manager was not well received on the stock market. The shares of the electric car subsidiary fell by almost a quarter after trading resumed, but recently recovered to minus 3.6 percent. The electric car subsidiary’s share price had already collapsed last week after a stock transaction with a company Dubai had burst.