Central Regional Government Establishes Special Management Account to Prevent Misuse of Funds by Hengda Group

[Photo by Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] According to Chinese economic media Caixin on the 26th (local time), some local governments in China have established special management accounts to prevent China Evergrande Group, a Chinese real estate developer, from misappropriating funds from homebuyers.

The special management accounts are measures to ensure that the deposits received from homebuyers by Evergrande Group are used exclusively for housing construction. This is to prevent any misconduct such as Evergrande diverting the deposits to repay principal and interest to creditors.

According to officials, at least eight local governments began setting up special management accounts from the end of last month. These include Anhui Province, Guizhou Province, Henan Province, and Jiangsu Province, where many of Evergrande Group’s unfinished housing construction projects remain.

In some southern cities such as Zhuhai and Shenzhen, officials from China’s housing market regulatory authority, the Ministry of Housing and Urban-Rural Development (MOHURD), are reportedly supervising the funds for Evergrande Group’s construction projects. MOHURD is said to have instructed local governments by the 24th to report the scale of funding gaps related to Evergrande’s unfinished construction projects.

The establishment of special management accounts by local governments is interpreted as a measure by authorities to respond to the Evergrande crisis with a focus on preventing harm to ordinary consumers.

According to Bloomberg News and The Wall Street Journal (WSJ), the Chinese government has instructed local governments to prepare for Evergrande Group’s default situation and has issued separate guidelines to Evergrande emphasizing the completion of housing and repayment of individual investors’ funds, prioritizing the protection of individual investors over shareholders or creditors.

Evergrande Group is China’s second-largest real estate developer and has recently faced a liquidity crisis due to aggressive expansion through borrowing. Evergrande reportedly failed to pay $83.5 million in interest on dollar bonds (approximately 98.4 billion KRW) and 232 million yuan in interest on yuan bonds (approximately 42.3 billion KRW) on the 23rd. Evergrande’s debt is known to exceed $300 billion.

This content was produced with the assistance of AI translation services.