In November 2019, Evergrande’s founder, Xu Jiayin, was speaking at the launch of a car venture, one of the many side businesses spun out from China’s second-largest property group. He articulated his five-word philosophy: rapid acquisition, close collaboration, intense networking, large scale and good quality.Those guiding principles had, by then, made him China’s richest man, with interests as varied as financial services, bottled water and football.
Two years later, Xu’s empire is in ruins. The total value of Evergrande’s shares has tumbled, from $40bn last year, to less than $4bn. China’s over-inflated property market is undergoing correction, and its dominant player is saddled with debts of $300bn. On Thursday, the company missed a deadline for paying nearly $84m in interest to foreign creditors.
The 62-year-old entrepreneur’s rags-to-riches story is emblematic of China’s economic miracle in the last three decades: rapid expansion fuelled by unrestrained borrowing. And his fall, too, mirrors a change in direction at state level: from allowing a small number of people to get rich first, to more recent interventions by president Xi Jinping, aimed at creating common prosperity.
Born into a poor family in China’s central Henan province on 9 October 1958, Xu was brought up by his grandmother during the years of Mao’s endless political campaigns. His father was a veteran-turned-warehouseman who fought in the second Sino-Japanese war. At a young age, he lost his mother to sepsis. “In school, all I ate was sweet potato and steamed bread,” he recalled in 2018.
Shortly after the cultural revolution ended in 1977, Xu tried, but failed, to secure a place at university. The following year, according to Chinese media, he prepared full-time for five months, and was finally admitted to Wuhan Institute of Iron and Steel.
Xu’s university tutor, Meng Xiankun, remembered him as talkative and sociable. He was appointed the class’s 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 the knack of finding allies.
When he left university, with China still in the shadow of the command economy, he secured a placement at a steel factory in his home town – and quickly stood out. His supervisor remarked: “He’s good at his job, down-to-earth, hardworking, very clever, good at dealing with people.”
Like many ambitious Chinese young people, Xu was not content with a stable job – an “iron rice bowl” as it was called. Shortly after Deng Xiaoping’s tour of the south in 1992, Xu packed up with some savings and a 30-page CV, and headed to Shenzhen, a small town on the border with Hong Kong.
It was the year that China began to open up in earnest. And it was here many Chinese billionaires made their first pot of gold. In 1996, Xu set up Evergrande in Guangzhou.
Over 25 years, the company saw massive growth. When the group listed in Hong Kong in 2009, it raised $9bn. Today, it has 778 projects under construction across 223 cities in China, according to the Financial Times.
What Evergrande made, it spent. It acquired China’s largest football club: Guangzhou FC, signing the former Italy head coach Marcello Lippi in a deal worth about €30m in 2012. In 2013, Evergrande set up a major endowment at Harvard University. It acquired a private jet, which can seat up to 160 passengers, estimated to be worth more than $45m.
In 2015, the Australian government ordered Evergrande to sell a $30m waterfront mansion in Sydney, after officials claimed it was in contravention of local laws that required foreigners to seek government approval before buying.
Xu’s taste for luxury earned him the moniker “belt brother”, after he entered China’s annual legislative conference sporting a gold belt buckle in the shape of an “H’, logo of French couture house, Hermès.
A request for comment to Evergrande went unanswered.
“Xu is a colourful figure. He lived an extravagant lifestyle that is now frowned upon by Xi as he kicks off his ‘common prosperity’ campaign,” says Dexter Roberts, senior fellow at the Washington DC-based Atlantic Council Asia Security Initiative. “For a long time, Evergrande’s business model, borrowing large sums of money and aggressively selling apartments that have not even been built, seemed like a smoking gun.”
In recent years, Beijing began to introduce a series of regulations to restrain property companies’ borrowing. But it may already be too late for Evergrande. Some analysts say it is now the most indebted property developer in the world.
“Xu is also one of those people Beijing now finds distasteful – flashy and over the top,” says Roberts. “I’d be really surprised if he emerges from this crisis unscathed.”