China’s securities regulator has accused Evergrande and its founder Hui Ka Yan of inflating its mainland Chinese revenues by almost $80billion (NZ$131.5b) over 2019 and 2020, in the first detailed allegations by authorities to shed
The company’s Hong Kong-listed entity was ordered into liquidation in January by a court in the territory, though the ruling’s implications in the distinct legal environment of the Chinese mainland, where almost all Evergrande’s assets are based, remain uncertain.
The Hengda filing quoted the CSRC’s preliminary decision as saying the company inflated revenue by recognising it in advance in 2019, resulting in an increase of Rmb214b — half of the total — and inflated revenue by Rmb350b in 2020, almost four-fifths of the total.
The CSRC, which according to the filing also suspects that bonds in the mainland were issued on a fraudulent basis, did not directly release its preliminary decision itself and did not immediately respond to a request for comment.
The filings do not refer to dollar-denominated bonds sold by Evergrande, on which it originally missed payments in September 2021. Nearly two years of negotiations between offshore investors and the company failed to produce any viable restructuring plan.
Beijing has over that period prioritised the completion of residential projects started by Evergrande and other developers.
Hui was placed under “mandatory measures” by Chinese authorities in September, according to a company filing at the time. In January, Evergrande’s headquarters in the southern city of Guangzhou were surrounded by police and newly erected fencing.
Hengda’s auditors in 2019 and 2020 were PricewaterhouseCoopers Zhong Tian, a mainland entity affiliated with PwC’s network. PwC Zhong Tian resigned as auditor in 2023, according to company filings.
![The Evergrande Mansions construction site in Dongguan in southern China. Photo / Gilles Sabrie, The New York Times](https://www.nzherald.co.nz/resizer/v2/NETH3GSS75BVJLVKOOPODLOGVY.jpg?auth=f481dac414ca1e9a881f3be492a90869977fa5b8ea0df44c84ac4de9d0f61e2d&width=16&height=11&quality=70&smart=true)
PwC, the auditors of the company’s accounts in Hong Kong, resigned the same year and are the subject of an investigation by Hong Kong’s audit regulator.
PwC did not immediately respond to a request for comment.
Natixis senior economist Gary Ng said the revelations raised the question of whether there were “more hidden financial tricks” in Evergrande’s financial reports.
Official data on Monday showed China’s real estate sector crisis is continuing. Property investment fell 9 per cent year on year in January and February, while new construction starts plummeted 30 per cent, their worst fall in more than a year.
Written by: Thomas Hale in Shanghai and Chan Ho-him and Cheng Leng in Hong Kong
© Financial Times