The Guilty Plea in Shenzhen Court
China's property sector has been gripped by a seismic development as Hui Ka Yan, the founder of beleaguered real estate giant China Evergrande Group, pleaded guilty to multiple serious charges in a high-profile trial. The proceedings unfolded over two days, April 13 and 14, 2026, at the Shenzhen Intermediate People's Court, marking a dramatic chapter in one of the largest corporate scandals in modern Chinese history. Hui, aged 67, expressed remorse during the hearing, admitting to offenses including illegal absorption of public deposits, fundraising fraud, and corporate bribery. The court announced that a verdict would be delivered at a later date, leaving observers speculating on the severity of the punishment given the scale of the alleged wrongdoing.
This guilty plea comes amid Evergrande's protracted collapse, which has left a trail of unfinished homes, unpaid debts, and shaken investor confidence across China and beyond. Once a symbol of China's breakneck property boom, Evergrande's downfall underscores the risks of unchecked debt accumulation in the sector.
Hui Ka Yan's Journey from Poverty to Power
Born in 1958 in rural Henan province, Hui Ka Yan rose from humble beginnings as a steelworker to become one of Asia's richest individuals. In 1996, he founded Evergrande in Guangzhou, initially focusing on residential developments. By leveraging aggressive expansion, pre-sales of apartments, and heavy borrowing, the company scaled rapidly. At its peak in 2017, Hui's net worth reached $45 billion, according to Forbes, making him China's richest person that year.
Hui's business acumen extended beyond property; he invested in electric vehicles through Evergrande New Energy Vehicle, acquired a football club (Guangzhou FC), and even dabbled in healthcare and commodities. His political connections were notable—he served as a delegate to China's top political advisory body, the Chinese People's Political Consultative Conference, from 2013 to 2018. However, this opulent lifestyle contrasted sharply with the financial house of cards he was building.
Evergrande's Debt Machine and the Property Boom
Evergrande epitomized China's property-led growth model, where developers sold homes off-plan to fund construction—a practice known as pre-sales. This allowed rapid scaling but relied on continuous refinancing. By 2020, Evergrande's liabilities exceeded $300 billion, equivalent to about 2% of China's GDP at the time. The company had over 1,300 projects in 280 cities, with contracted sales driving revenue figures that later proved inflated.
Pre-sale funds, totaling billions, were often diverted to new projects or debt servicing rather than completing existing ones, a common but risky tactic in the sector. This Ponzi-like structure worked during the boom years when property prices soared, fueled by urbanization and easy credit.
The 2021 Default: Triggering a National Crisis
Evergrande's troubles erupted in 2021 when it missed interest payments on offshore bonds, sparking fears of a Lehman Brothers-style contagion. The default exposed $300 billion in debts, including $20 billion in offshore obligations. Protests erupted from homebuyers facing unfinished apartments and investors in wealth management products that lost value overnight.
By late 2021, trading in Evergrande's Hong Kong-listed shares was suspended. The crisis rippled through the sector, with sales plummeting and prices declining. In 2026, new home sales are projected to fall 10-14%, with prices down 2-4%, amid persistent oversupply.
Beijing's Three Red Lines: Curbing the Debt Binge
In August 2020, China's central bank and housing regulator introduced the 'three red lines' policy to rein in developer leverage. The rules capped key debt ratios: liability-to-asset at 70%, net debt-to-equity at 100%, and cash-to-short-term debt at 100%. Developers breaching any 'line' faced funding restrictions.
Evergrande breached all three, halting its access to bank loans and bonds. The policy aimed to shift from debt-fueled growth to sustainable development but triggered a liquidity crunch. Real estate investment dropped 11.1% year-on-year in early 2026, exacerbating the slump.
- Liability-to-asset ratio: Measures total debt relative to assets.
- Net debt-to-equity: Gauges borrowing against equity after cash reserves.
- Cash-to-short-term debt: Ensures liquidity for immediate obligations.
Prior Penalties and Regulatory Hammer
Before the criminal trial, regulators struck hard. In March 2024, China's securities watchdog fined Evergrande's main unit $580 million and Hui $6.6 million for inflating revenues by nearly $78 billion in 2019-2020 to issue bonds fraudulently. Hui received a lifetime ban from capital markets. A Hong Kong court ordered offshore liquidation in early 2024, with shares delisted in August 2025. Progress has been glacial; only $255 million in assets sold against $45 billion claims by mid-2025.
Unpacking the Eight Charges in the Trial
The Shenzhen trial indicted Hui on eight counts, with Evergrande Group and its real estate arm facing related charges. Key allegations include:
| Charge | Description |
|---|---|
| Illegal absorption of public deposits | Taking funds from public without proper approvals. |
| Fundraising fraud | Misleading investors to raise capital. |
| Illegal issuance of loans/securities | Unauthorized financial products. |
| Misuse of funds | Diverting raised money improperly. |
| Fraudulent securities issuance | Using fake data for bonds. |
| Irregular disclosure | False financial reporting. |
| Embezzlement | Personal gain from company assets. |
| Corporate bribery | Offering bribes for favors. |
Illegal fundraising alone can warrant life imprisonment. Hui's plea may mitigate but not eliminate severe penalties.
Sentencing Outlook and Liquidation Hurdles
Analysts expect a lengthy sentence, possibly life, mirroring past fraud cases. Liquidators seek to recover $6 billion from Hui's dividends. Onshore restructuring prioritizes home completions, but offshore assets complicate matters. For details on the trial, see the Reuters report.
The Plight of 1.6 Million Homebuyers
Evergrande's pre-sales left around 1.6 million families with paid-for but undelivered homes across stalled sites. Protests have persisted, pressuring Beijing to intervene. Compensation remains elusive amid liquidation delays. Check BBC coverage for victim stories: BBC article.
Economic Ripples: GDP Drag and Sector Slump
The crisis has shaved 2 percentage points off annual GDP growth. Property, once 25-30% of GDP, now weighs heavily with sales down sharply. In Q1 2026, investment fell 11%, consumer confidence wanes amid price drops. Banks hold trillions in exposure.
Global Lessons and Investor Caution
Evergrande signals risks in emerging markets' debt models. Investors fled Chinese property stocks; recovery hinges on policy easing. The WSJ details broader implications: WSJ analysis.
Photo by Patrick Xu on Unsplash
Path to Recovery: Challenges Ahead
Beijing eases 'three red lines' selectively, but oversupply persists. Sales may stabilize by 2027 if stimulus works, yet structural shifts to tech/manufacturing continue. Evergrande's saga warns of balancing growth with stability.
