Behind Xu Jiayin and Evergrande's punishment: Evergrande's thunder has long had abnormal premonition signals
A few days ago, Evergrande Real Estate received a prior notice of administrative punishment and market ban from the China Securities Regulatory Commission, and in response to the three violations of laws and regulations of Evergrande Real Estate, the CSRC intends to decide: 1. Order Evergrande Real Estate to make corrections, give a warning, and impose a fine of 417,500 yuan, 2. Give a warning to Xu Jiayin, and impose a fine of 47 million yuan, 3. Give Xia Haijun a warning, and impose a fine of 15 million yuan.
After this penalty came out, many people's first reaction was that Evergrande had a debt of 2 trillion yuan, and now it has issued a fine of 4.175 billion, can he take it out?
Some netizens said: Although it is not too late to make amends, the wolves have already run to the other half of the earth with the sheep in their mouths, and it is still a little too late to say that they will punish the wolves and prevent the wolves from operating in the market anymore.
From this point of view, we found that there are too many holes and problems in Evergrande. Evergrande actually inflated its income by 213.989 billion yuan in 2019, and the audit problem is also very big, with Evergrande's inflated income of 350.157 billion yuan in 20 years, which is equivalent to about 80% of the income obtained through financial fraud in advance. In 19 years, the cost was inflated by 173.267 billion yuan, the inflated profit was 40.722 billion yuan, and in 20 years, the inflated cost was 298.868 billion yuan, and the inflated profit was 51.289 billion yuan.
That is to say, all along, Evergrande's revenue and profits, many of them are whitewashed through financial fraud, only the debt is real, and then use the whitewashed financial statements to issue various debts to make money, the scale of debts to trillions, the profits are slowly transferred to personal pockets, debts are left in the company, all kinds of troubles, all kinds of thunder thrown to the society.
The regulatory authorities used two "particularly bad methods", emphasizing two "particularly serious circumstances", and the roles of the main culprit and accomplice were also very clear: Xu Jiayin made decisions and organized the implementation, and Xia Haijun organized and arranged the preparation of false financial reports!
Judging from the basic law of problems in the real estate market, if a real estate company operates like this, then an unspoken rule and consensus are generally formed behind it, and there must be many real estate companies that also operate in this way.
Now it is really difficult to clean up a mess like Evergrande, although a lot of measures have been taken against them, and they will not be allowed to enter the securities market again. But how many assets can be used to pay this huge fine that Evergrande Real Estate can really be enforced? Because we know that it is a trivial matter for Evergrande to pay fines, and what to do with so many remaining debts is a big matter.
Therefore, the purpose of punishing Evergrande is to avoid the rebirth of the next Evergrande, which is financial fraud and whitewashing, and then use the financial statements to issue various debts to make money, how to avoid the recurrence of this problem, how to prevent it in advance, strictly review and supervise how many similar problems exist in the current real estate enterprises, plug the hole in advance, and avoid the scale of debt getting bigger and bigger, which is the key at the moment.
Evergrande's thunder is getting bigger and bigger, what are the abnormal harbinger signals behind it?
In fact, in 2016, when Evergrande was still at its peak and was popular, a rating agency downgraded Evergrande Group. The foreign rating company is Moody's, which in January 2016 downgraded Evergrande's credit rating to "B2" from "B1" due to a surge in debt, with a negative outlook. Similarly, in 2017, Moody's expressed concern about Sunac China's liquidity situation.
Every time Moody's downgrades the rating of domestic companies, it will always be criticized or attacked by some public opinion media, and now looking back, this is actually neither rational nor objective, and we have not rationally listened to the premonition signals sent by whistleblowers.
If we could see the truth that a company of Evergrande's size is full of lice under the luxurious leather robe six years in advance, we may be able to avoid trillions of debt losses.
After all, we look at the data that many of Evergrande's debt and financial fraud problems only occurred after 2016, and Evergrande Real Estate publicly issued 15 Evergrande 03 from July 2015 to May 2019. 19 Evergrande 02 and other corporate bonds, 20 Evergrande 02 bonds were issued on May 26, 2020 with an issue size of 4 billion yuan, 20 Evergrande 03 bonds were issued on June 5, 2020 with an issue scale of 2.5 billion yuan, 20 Evergrande 04 bonds were issued on September 23, 2020 with an issue scale of 4 billion yuan, 20 Evergrande 05 bonds were issued on October 19, 2020 with an issue scale of 2.1 billion yuan, and 21 Evergrande 01 bonds were issued on April 27, 2021 with an issue scale of 8.2 billion yuan.
In 2019, Evergrande Real Estate's inflated income was RMB213.989 billion, accounting for 50.14% of the current operating income, corresponding to inflated costs of RMB173.267 billion and inflated profits of RMB40.722 billion, accounting for 63.31% of the total current profits, and in 2020, Evergrande Real Estate inflated its revenue of RMB350.157 billion, accounting for 78.54% of the current operating income, corresponding to inflated costs2. 98.868 billion yuan, with an inflated profit of 51.289 billion yuan, accounting for 86.88% of the total profit of the current period.
Also punished together were Xu Jiayin, Xia Haijun, Pan Darong, Pan Hanling, Ke Peng, Zhen Litao, and Qian Cheng, all of whom were senior executives of Evergrande, all of whom were suspected of participating in the financial fraud of the 2019 and 2020 annual reports, and to put it bluntly, they were all accomplices of Xu Jiayin.
In addition, another abnormal signal of Evergrande is that Evergrande is good at throwing money in the direction of the popular market tide through high leverage and high turnover, and where the heat is to layout, giving the market an illusion of sufficient financial resources and thriving, such as investing in the football industry and Evergrande to build cars, whitewashing Taiping to achieve financial fraud, and achieving fake profits to market financing. The purpose of going to the bank for a loan, and then to get as much land as possible to obtain endless credit support, so as to achieve the outflow other than the so-called open source and distribution, and finally to distribute the financial market financing, the advance collection of residents' house purchases, and the money that should be given to suppliers.
In addition, it is a risk signal from media reports. As early as 2021, there were media reports that Xu Jiayin and Ding Yumei jointly sold 1.2 billion shares of China Evergrande, and some assets were transferred overseas, and Evergrande listed in Hong Kong through the "small red chip" structure, and the offshore companies in the British Virgin Islands and the Cayman Islands, which were 100% controlled by Xu Jiayin and Ding Yumei respectively, received most of the dividends through Evergrande, and transferred them overseas before and after the accident, and through the operation of "technical divorce", it finally fell into the pocket of Ding Yumei, the "overseas ex-wife".
Again, the delay in the issuance of the annual report or the failure to issue the annual report itself is also a harbinger signal of thunder. For example, in the first quarter of 2022, Evergrande, Sunac, Shimao, Kaisa, Aoyuan, Xinli and other companies all postponed or did not issue annual reports, and the reasons are all like primary school students' homework, such as Evergrande is "the company's operation has changed, and auditors have increased a lot of work and the impact of the epidemic". Shimao was "affected by the epidemic (management was isolated), while Kaisa was "affected by the epidemic in Shenzhen, and the headquarters building was sealed." "Xinli is" no one in the company, and the main employees of the financial report have left. ”
Since January 1, 2021, Evergrande Real Estate has failed to pay off its due debts in a timely manner and has not disclosed them in a timely manner as required, involving an amount of 278.531 billion yuan.
In addition, some netizens mentioned that what about PricewaterhouseCoopers, which has been issuing unqualified audit reports for Evergrande for 14 years? Without the endorsement of PricewaterhouseCoopers' "unqualified audit report", would Evergrande have been able to fool so many people and cause a mess of more than 2 trillion yuan of debt explosion today?
Previously, the Hong Kong court issued a winding-up order to Evergrande, and before that, it was rumored that Evergrande had never made a profit, and Evergrande was still there to refute the rumors, which was confirmed.
Behind the fine on Xu Jiayin
If the severe punishment for "financial fraud" continues, digging deep into the chaos of on-balance sheet and off-balance sheet liabilities, and continuing to promote the loopholes of various regulatory mechanisms along the chaos, so as to deter other real estate companies, then China's real estate industry may have hope.
Late justice, but also justice, to save the real estate industry, Evergrande is a typical negative sample.
Now Evergrande shares have been delisted at a price of 0.16 yuan, and the total market value of Evergrande in 2019~2020 has reached more than 200 billion, which is basically wiped out. The current punishment of Evergrande Xu Jiayin and the company's relevant personnel, and the lifetime ban on the securities market, are mainly to deter other listed companies from doing so, to give shareholders more trust, and to severely punish writers is an important part of building confidence.
The second is to make Evergrande a sample and fill the loopholes in the financial system. The most important bad influence brought about by Xu Jiayin was to take advantage of the panic of financial institutions about his bankruptcy, whitewash the peace, expand debts, and form a vicious circle. How the lending loopholes are created, how the system is set to restrain human greed, and how to make up for and modify them may be the major issues that need to be solved next.
Through this sample, it is very important to strengthen the construction of the financial system. Financial risks have always been more prevention than cure, and it is also necessary to sort out various loopholes in the entire market, and various abnormal signals of real estate companies (whistleblowers' early warnings, delayed or non-issuance of annual reports, audit report problems, whitewashing, inflated income, and issuance of debt financing) can smell the risks in advance, stop losses in time, and clear mines in time to avoid real estate thunder rolling bigger and bigger. For those who have made false accounts for Xu Jiayin and conducted audits and received high returns, the intertwined interests behind the parties may be able to deter the industry to a greater extent and reinvigorate the confidence of the market. For the real estate industry, avoiding the birth of the next Evergrande may be more important than anything else.