ការកើនឡើង និងការដួលរលំនៃស្ថាបនិក Evergrande លោក Xu Jiayin

'Red lines' drawn by central bank in 2020 strike down China's richest man

SHANGHAI : Xu Jiayin built China Evergrande Group into one of China's largest property developers in less than 25 years. Holding more than 70% of the company, the founder has had full command of its operations. But his colossus is now mired in debt of about 2 trillion yuan ($312 billion) and this week appeared to be days away from being officially declared in default.

Born to a poor family in Henan Province, Xu took advantage of China's reform and opening-up policy to become the country's wealthiest man.

His success came with a built-in trap, and Xu now risks losing everything. While Evergrande is set to avert its first bond default, its crisis continues.

At the center of Jutaigang, a village in the Chinese inland city of Zhoukou, Henan Province, stands a 3-meter-plus stone monument. Its Chinese inscription reads, "Xu Jiayin fosters human resources for the nation and brings well-being to posterity."

The monument was erected with donations from residents to praise Xu's contributions to the village.

Those contributions were many. Xu built elementary and junior high schools for the village and "repaired all the roads in the village," a village official said. When Xu returned to the village in 2018, he handed out 3,000 yuan (almost $470), rice and cooking oil to every household, the official added.

Xu was born in 1958 to a father who had fought in World War II. His mother died soon after giving birth, and he was raised by one of his grandmothers.

According to "Evergrande Group: Xu Jiayin," a book written by Guo Hongwen and Xu Yahui, Xu as a child ate mantou steamed buns made of corn or a type of grain called kaoliang. He even ate moldy mantou after scraping off the mold, the book says. He slept on a bamboo bed and studied at a clay desk. His grandmother made vinegar, and his father grew willow trees to support the family. Xu helped to sell the results of his grandmother's and father's labor.

In school, Xu "was quiet but performed very well," an elementary school classmate said. "So he could go to university, unlike us."

A turning point in his life came when the national unified university entrance examination resumed in 1977. Xu successfully enrolled at the Wuhan Iron and Steel Institute (now Wuhan University of Science and Technology).

He later took a job as an engineer at Wuyang Iron & Steel (now Heibei Iron and Steel Group Wuyang Iron and Steel), a state-run company in Henan Province.

Another turning point came in 1992 when Xu, as one of the steelmaker's few university-educated employees, was put in charge of a heat-treatment process. From there, he quickly climbed the company ladder.

Also in 1992, during a visit to Shenzhen, Guangdong Province, former Chinese leader Deng Xiaoping called for accelerating his "reform and opening-up" policy.

Having felt the breath of a free economy in Wuhan, Hubei Province, while at university, Xu decided to leave the state-owned company and the stable employment it provided. He headed to Shenzhen and began looking for a new job.

He arrived amid a real estate boom touched off by the liberalization of land use and transactions. He joined a trading company and gained experience in property development. In 1996, with an initial staff of eight, Xu founded Evergrande.

The first project Xu eyed was a plan to redevelop a 110,000-sq.-meter site in Guangzhou, Guangdong Province, that had previously hosted an agrochemical plant. Surrounded by other plants, the site was not ideal for a residential project. But the terms were favorable, and the seller agreed to let Xu pay in installments.

It was 1997, and Xu named the project Jinbi Garden. It took him a year to complete the purchase, build condominiums and have the first homebuyers move in.

That was also the year that the Asian financial crisis struck, but Xu managed to swiftly collect funds from condo buyers, clearing what is usually the tallest hurdle in front of a fledgling developer.

Jinbi Garden brought in a huge amount of money and put Evergrande on a path to rapid growth. It would go on to build and sell housing developments all over China.

Evergrande went public on the Hong Kong Stock Exchange in 2009. According to one ranking, it sold the most square meters of housing in China for the January-March quarter of 2010. Xu became a billionaire and by 2017 was China's wealthiest person, thanks to Evergrande's rising share price.

The company was in its prime, and two years later would expand into the development of new energy vehicles.

Then in the summer of 2020 the People's Bank of China (PBOC), the country's central bank, announced its "three red lines," rules that changed Evergrande and Xu's fate. Developers had to cap their liability-to-asset ratios (excluding advance receipts) to 70%, limit their net debt-to-equity ratio to 100%, and secure more cash than short-term debt. The PBOC ordered banks to restrict their lending to developers that crossed any of these "lines."

By that time, Evergrande had cemented its status as a major real estate developer. It was maintaining a bullish view on the Chinese property market and was no longer as cautious as it had been in its infancy.

Before the three red lines were drawn, Evergrande had aggressively expanded into so-called third- and fourth-tier cities, regional cities excluding provincial capitals. But its rush into these communities pushed it over all three lines, and lenders became unwilling to provide more capital. Evergrande instantly faced financing difficulty.

Ren Zeping joined Evergrande in late 2017 and became its chief economist. He said he "called for reducing the debt ratio, only to be criticized at a meeting of executives for hours."

By Oct. 12 this year, the company had failed three times to pay interest on its U.S. dollar-denominated bonds. With the 30-day grace period to end on Saturday, there is an increasing possibility that an Evergrande default on these dollar-based bonds will be officially acknowledged.

A bit surprisingly, people in Zhoukou, where Xu's home village of Jutaigang is located, cast chilly eyes toward Xu.

"Because Evergrande lifted home prices," a man in the city said, "houses here now cost as much as 3,000 yuan to 6,000 yuan [per square meter]. Ordinary people cannot afford them."

Some residents are also critical of Xu's family members, whose flamboyant lifestyle was on display at a glitzy party, videos of which have been making the rounds online.

Xi Jinping's government, which is sensitive to the public's resentment toward the gigantic developer, has remained silent on Evergrande's predicament. Xu, who has steered through numerous crises, will have to win back the people if he is to make it through Evergrande's latest crunch.

Nikkei Asia