Executive Detained: Evergrande’s Electric Vehicle Unit Faces More Challenges

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Police Detain Top Executive at Evergrande’s EV Arm

In the latest setback for China Evergrande, one of its top executives, Liu Yongzhuo, vice chairman, and executive director of China Evergrande New Energy Vehicle, has been detained by the police. This development adds to the challenges faced by the world’s most heavily indebted property developer. The news led to a nearly 11% plunge in Evergrande New Energy Vehicle’s shares when trading resumed.

Shadow Bank’s Bankruptcy Raises Concerns

Over the weekend, Zhongzhi Enterprise Group, a significant shadow bank in China that extended billions in yuan to property developers, declared bankruptcy liquidation as it struggled to meet its debt obligations. This adds to the broader industry-wide crisis resulting from a crackdown on excessive borrowing in recent years, forcing numerous Chinese developers out of business or into survival mode.

Evergrande’s Financial Turmoil Continues

Evergrande has been grappling with a financial crisis since defaulting on its debt obligations two years ago. Amid restructuring efforts and asset sales to avoid defaulting on $340 billion in debt, the company confirmed in September that its chairman, Hui Ka Yan, had faced “mandatory measures” due to suspicions of illegal activities. The current status of Hui Ka Yan remains uncertain.

Evergrande New Energy Vehicle Faces Obstacles

Evergrande New Energy Vehicle, the electric vehicle subsidiary, witnessed a nearly 20% decline in shares last week after a deal to sell shares to Dubai-based NWTN Motors lapsed. The recent announcement of Liu’s detention did not provide specific details regarding the alleged “illegal crimes.” The EV company has also faced challenges in securing funding, causing delays in its manufacturing plans.

Concerns Over Shadow Banking and Economic Impact

The bankruptcy liquidation of Zhongzhi, one of China’s major private asset management companies, underscores the challenges faced by shadow banks. These entities operate outside traditional banking regulations and have played a crucial role in Chinese finance. Zhongzhi’s financial woes, with debts exceeding assets, reflect broader concerns about the impact of the property market downturn on these financial institutions.

SOURCE: Ref Image from Reuters

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