China sentences Evergrande founder to life in prison

A court in China on Thursday sentenced the billionaire founder of Evergrande to life in prison, years after the real estate giant’s collapse brought China’s financial system to the brink.

Hui Ka Yan, the company’s founder and former chair, was also ordered to forfeit all of his personal assets, marking the final chapter in a remarkable fall from the upper echelons of Chinese society. Once one of the world’s richest men, Hui had belonged to an elite group of political advisers and cultivated the image of a flamboyant tycoon.

The Shenzhen Intermediate People’s Court found that between 2016 and 2021, Hui and Evergrande engaged in large-scale financial fraud and committed crimes including misuse of funds, fundraising fraud and illegally taking public deposits, according to an announcement the court posted on social media. Hui pleaded guilty to the charges in April.

On Thursday, Hui stood expressionless in a navy blue shirt, flanked by two police officers, as the court handed down its sentence. It was the first time he had been seen in public since his sudden disappearance in 2023. His hair, once jet black, was now white. (In more flush times, Hui wore a gold-buckled Hermès belt to a staid political conference and traveled to Paris to taste rare French wines.)

The court stripped him of his political rights for life and fined Evergrande Group and its subsidiary, Evergrande Real Estate Group, a combined $2.35 billion.

Evergrande was once China’s fastest-growing property developer. But its collapse in 2021 under more than $300 billion of debt pushed China’s financial system to the edge and exposed a vulnerability in the Chinese economy: its extraordinary dependency on real estate to drive growth.

Few companies played a bigger role in China’s staggering real estate boom. Evergrande’s crash helped usher in a prolonged housing crisis that is still being felt across the economy.

The court found that Hui bore responsibility for Evergrande Group’s operations and should be punished severely because his actions and those of the company “seriously disrupted the socialist market economic order,” according to its social media post.

“The amount involved in the crime is exceptionally large, the circumstances are particularly heinous, exceptionally heavy economic losses have been caused, and the harm to society is extremely grave,” the court said.

Hui founded Evergrande in 1996 in southern China just as the country was beginning to urbanize and move people from the countryside into the cities. Evergrande rode that transformation to spectacular heights, and Hui expanded his empire to include a soccer team and an electric vehicle company.

But by 2020, Beijing was growing worried that its property boom — the biggest the world has ever seen — was threatening the financial system. Developers like Evergrande had borrowed extensively from local governments, banks and other creditors to finance breakneck expansion. To cool the market, officials imposed restrictions on how much developers could borrow. For heavily indebted companies like Evergrande, the measures cut off the steady flow of cash they needed to keep building.

When Evergrande collapsed in 2021, much of the blame fell on Beijing and its abrupt crackdown. Homebuyers protested in the streets in cities across China. But the company had been borrowing beyond its means for years and had engaged in questionable accounting.

As its cash crunch deepened, the company even turned to its own employees, pressuring them to put up money for short-term loans. Several months after Evergrande defaulted, the company announced that banks had seized $2 billion.

An internal investigation later found that executives had engineered a plan in late 2020 to circumvent borrowing restrictions by arranging for third parties to take out loans using Evergrande subsidiaries as collateral. Such practices would lead to the company’s decline and, ultimately, the arrest of Hui and other executives.

A Hong Kong court ordered Evergrande into liquidation in 2024. On Thursday, two courts in Shenzhen also sentenced 56 other people, including Hui’s two sons, to terms ranging from 22 months to 18 years.

Evergrande’s rise was part of a property boom that enriched a system of local governments that leased land to developers, banks that lent them money, and the Wall Street firms that collected fees as dozens of Chinese real estate companies went public.

Its collapse exposed the system’s excess and vulnerabilities. It set off a cascade of defaults and helped trigger a property downturn that has weighed on the country’s economy for years, eroding a major source of wealth for the country’s middle class.

For millions of Chinese families, apartments had been more than places to live. They were seemingly safe investments and a vehicle for building wealth — a bet that unraveled as prices tumbled and developers failed.