In November 2019, the founder of Evergrande, Xu Jiayin, was speaking at the launch of an automotive company, one of the many parallel companies from the second Chinese real estate group. He articulated his philosophy in five parts: fast acquisition, close collaboration, intense networking, large scale and good quality. These guiding principles had by then made him the richest man in China, with interests as diverse as financial services, bottled water and football.
Two years later, Xu’s empire is in ruins. The total value of Evergrande shares has fallen from $ 40 billion last year to less than $ 4 billion. China’s over-inflated real estate market is undergoing a correction and its dominant player is grappling with $ 300 billion in debt. On Thursday, the company missed a deadline to pay nearly $ 84 million in interest to foreign creditors.
The 62-year-old entrepreneur’s fortune story is emblematic of China’s economic miracle of the past three decades: rapid expansion fueled by unrestricted borrowing. And his fall also reflects a change of direction at the state level: from allowing a small number of people to get rich first, to President Xi Jinping’s more recent interventions aimed at creating common prosperity.
Born into a poor family in central China’s Henan Province on October 9, 1958, Xu was raised by his grandmother during the years of Mao’s endless political campaigns. His father was a veteran turned storekeeper who fought in the Second Sino-Japanese War. At a young age, he lost his mother to sepsis. “At school, I only ate sweet potatoes and steamed bread,” he recalls in 2018.
Shortly after the Cultural Revolution ended in 1977, Xu tried unsuccessfully to get a place in college. The following year, according to Chinese media reports, he prepared full-time for five months and was finally admitted to the Wuhan Iron and Steel Institute.
Xu’s college tutor, Meng Xiankun, remembered him as being talkative and sociable. He was appointed class health commissioner, which involved persuading classmates to sweep the floor and clean the windows. “But he never complained,” Meng said in 2010, adding that Xu had a knack for finding allies.
When he left college, with China still in the shadow of a managed economy, he got an internship at a steel plant in his hometown – and quickly stood out. His supervisor remarked, “He is good at his job, down to earth, hardworking, very smart, good with people.
Like many ambitious young Chinese, Xu was not content with a steady job – an “iron bowl of rice,” as it was called. Shortly after Deng Xiaoping’s tour of the south in 1992, Xu packed his bags with some savings and a 30-page resume and headed to Shenzhen, a small town on the border with Hong Kong.
This is the year China began to open up in earnest. And this is where many Chinese billionaires made their first pot of gold. In 1996, Xu established Evergrande in Guangzhou.
In 25 years, the company has experienced massive growth. When the group broke into Hong Kong in 2009, it raised $ 9 billion. Today, it has 778 projects under construction in 223 cities in China, according to the Financial Time.
What Evergrande did, he spent. He acquired China’s biggest football club: Guangzhou FC, signing former Italian head coach Marcello Lippi in a deal worth around € 30 million in 2012. In 2013, Evergrande has created a large endowment at Harvard University. It has purchased a private jet that can accommodate up to 160 passengers, estimated at more than $ 45 million.
In 2015, the Australian government ordered Evergrande to sell a $ 30million waterfront mansion in Sydney, after officials claimed it violated local laws that required foreigners to seek government approval before buying.
Xu’s taste for luxury has earned him the nickname “Brother of the Belt,” after entering China’s annual legislative conference sporting a gold “H” -shaped belt buckle, the logo of the House of French couture Hermès.
A request for comment from Evergrande went unanswered.
“Xu is a colorful figure. He has lived an extravagant lifestyle that is now frowned upon by Xi as he launches his campaign for ‘common prosperity’, ”said Dexter Roberts, senior researcher at the Washington-based Atlantic Council Asia Security Initiative. DC. “For a long time, Evergrande’s business model, borrowing large sums of money and aggressively selling apartments that weren’t even built, seemed like a smoking gun.”
In recent years, Beijing has started to introduce a series of regulations to restrict borrowing by real estate companies. But it may already be too late for Evergrande. Some analysts say he is now the most indebted real estate developer in the world.
“Xu is also one of those people that Beijing now finds unpleasant – gaudy and exaggerated,” Roberts said. “I would be really surprised if he comes out of this crisis unscathed.”