BEIJING, China: This week, China Evergrande Group said its founder and chairman, Hui Ka Yan, is being investigated over suspected "illegal crimes."
However, the company did not say whether Hui was still running the company or what crimes he is under investigation for.
After a report confirming that its chairman had been placed under police watch, trading in shares of the world's most indebted property developer, with more than $300 billion in total liabilities, was suspended earlier in the day.
"The Company hereby announces that the Company has received notification from relevant authorities that Mr. Hui Ka Yan has been subject to mandatory measures in accordance with the law due to suspicion of illegal crimes," Evergrande said, adding that its shares will remain suspended until further notice.
The debt levels affecting China's struggling property sector has raised fears among investors of a spillover into the country's banking system, and is threatening to undermine Beijing's efforts to boost the recovery of the Chinese economy.
Since its debt issues became public in 2021, Evergrande, previously China's leading developer, has struggled from one crisis to another and defaulted on its offshore debt obligations later in the same year.
Gary Ng, Asia Pacific senior economist at Natixis, said, "It is unclear why Hui is under police surveillance, but it may signal certain negotiations demanded from the government. The latest development has disrupted the hope of restructuring."
Hui, a 64-year-old former steel technician who founded Evergrande in 1996, moved in power circles and exuded confidence about his business just two years ago.
Yan Yuejin, analyst at the E-house China Research and Development Institution in Shanghai, said, "We believe that Evergrande's debt turmoil has had a great turmoil and negative impact on the global economy, and the things behind it are not simple."
Evergrande's latest issues come amid Beijing's implementation of a series of related measures in the last few weeks aimed at reviving the country's struggling property sector, which includes cutting existing mortgage rates.