Chinese Real Estate Developer Kaisa’s Debt Defaults Reflect CCP Infighting: Expert

News Analysis Investors of Kaisa Group, one of China’s most active real estate developers, on Nov. 3 received a notice of overdue debt defaults from the company. A similar default happened one month earlier with another real estate developer, Fantasia Holdings. Ji Da, a China affairs expert who lives in the United States, told The Epoch Times that the reason property companies like Fantasia and Kaisa catch so much public attention is that they are involved in a power struggle at the top of the Chinese Communist Party (CCP). Their fortunes seem to reflect what is happening with the infighting and purges among the CCP’s different factions. “How come the real estate developers who used to call the shots can’t even borrow money now and have to break their contracts? That’s because the political power behind them is no longer viable,” Ji said. This is not the first time that Kaisa missed a bond payment deadline. Founded in 1999 by Guo Yingcheng and his two brothers, and headquartered in Hong Kong, Kaisa Group was listed on the Hong Kong Stock Exchange in Dec. 2009. Urban renewal projects were once the company’s main business, which was known as the “King of Redevelopment,” said Chinese financial media wallstreetcn.com. Anyone familiar with China’s political system knows that it’s impossible to get urban renewal projects if a real estate company has no connections to the CCP official circles. Guo and Kaisa Group are considered to be tied to Zhou Yongkang, previously a member of the 17th Politburo Standing Committee and secretary of the Central Political and Legal Affairs Commission, who was once one of the most powerful leaders inside the CCP. Zhou, as a member of the Jiang Zemin faction and thus stood opposite Xi Jinping, the current CCP leader, was placed under investigation for alleged abuse of power and corruption in late 2013 and expelled from the Party in 2014. In late November 2014, after Zhou’s arrest, Shenzhen Planning and Land Commission “locked up” a number of Kaisa’s unsold properties. As a result, several financial institutions filed for pre-litigation property preservation and seized some of the company’s assets in Shenzhen, reported Caixin, a Chinese financial media. At the end of 2014, Guo resigned as chairman for “health reasons,” which triggered early repayment of the $51.36 million financing from HSBC, a Hong Kong-based bank. Kaisa failed to make the payment on time, according to HKEXnews, a Hong Kong Exchanges and Clearing Market website. According to Chinese media reports in 2015, a land development project of the Kaisa Group involved Jiang Zunyu, a former member of the Standing Committee, secretary of the Political and Legal Affairs Commission in Shenzhen, and a direct subordinate of Zhou. Jiang was investigated by Chinese authorities on Oct. 13, 2014. Guo sent a written report to the CCP’s Discipline Inspection Commission, admitting that he and Jiang were involved in some “gray areas” together. Another senior official Kaisa was linked with was Yang Xiancai, a senior judge and former head of the Guangzhou High Court’s Executive Bureau—and Zhou’s subordinate. In 2010, Guo confessed to bribing Yang with $130,000, to put pressure on Zhong Hua, the developer of Sinopec Tower in Guangzhou, to sell the property to Kaisa for less than market value. The project later became one of Kaisa’s flagship projects and made hundreds of millions of dollars, according to state-owned China News. Despite Zhong’s denial, the court recognized that Yang approved the deal. Zhong said he did not receive a single penny. “They were in cahoots, I was … cheated.” Yang was later sentenced to life imprisonment, while Guo was exempt from punishment for cooperating with the authorities by testifying. Kaisa Group is also tied to the “Zhongxu gang” of Zhou Bin, Zhou Yongkang’s son. The front operator of the “Zhongxu gang” was Wu Bin, known as “money bags” and “top butler” of Zhou’s family, who apparently owned Zhongxu investment company, had a stake in Kaisa Group’s Chengdu Lijinggang project, according to Jiemian, state-owned financial media based in Shanghai. Wu also had business interests in Fantasia Holdings. In January 2015, Fantasia’s property in Shenzhen was also locked down following the official lockdown of Kaisa’s property in November 2014. The founder of Fantasia, Zeng Bao Bao, is the niece of former Vice President Zeng Qinghong, who, along with Zhou Yongkang were hardcore supporters of Jiang Zemin, known as the “Jiang faction.” Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times. Kathleen Li Follow More articles from this author

Chinese Real Estate Developer Kaisa’s Debt Defaults Reflect CCP Infighting: Expert

News Analysis

Investors of Kaisa Group, one of China’s most active real estate developers, on Nov. 3 received a notice of overdue debt defaults from the company. A similar default happened one month earlier with another real estate developer, Fantasia Holdings.

Ji Da, a China affairs expert who lives in the United States, told The Epoch Times that the reason property companies like Fantasia and Kaisa catch so much public attention is that they are involved in a power struggle at the top of the Chinese Communist Party (CCP). Their fortunes seem to reflect what is happening with the infighting and purges among the CCP’s different factions.

“How come the real estate developers who used to call the shots can’t even borrow money now and have to break their contracts? That’s because the political power behind them is no longer viable,” Ji said.

This is not the first time that Kaisa missed a bond payment deadline.

Founded in 1999 by Guo Yingcheng and his two brothers, and headquartered in Hong Kong, Kaisa Group was listed on the Hong Kong Stock Exchange in Dec. 2009. Urban renewal projects were once the company’s main business, which was known as the “King of Redevelopment,” said Chinese financial media wallstreetcn.com.

Anyone familiar with China’s political system knows that it’s impossible to get urban renewal projects if a real estate company has no connections to the CCP official circles.

Guo and Kaisa Group are considered to be tied to Zhou Yongkang, previously a member of the 17th Politburo Standing Committee and secretary of the Central Political and Legal Affairs Commission, who was once one of the most powerful leaders inside the CCP.

Zhou, as a member of the Jiang Zemin faction and thus stood opposite Xi Jinping, the current CCP leader, was placed under investigation for alleged abuse of power and corruption in late 2013 and expelled from the Party in 2014.

In late November 2014, after Zhou’s arrest, Shenzhen Planning and Land Commission “locked up” a number of Kaisa’s unsold properties. As a result, several financial institutions filed for pre-litigation property preservation and seized some of the company’s assets in Shenzhen, reported Caixin, a Chinese financial media.

At the end of 2014, Guo resigned as chairman for “health reasons,” which triggered early repayment of the $51.36 million financing from HSBC, a Hong Kong-based bank. Kaisa failed to make the payment on time, according to HKEXnews, a Hong Kong Exchanges and Clearing Market website.

According to Chinese media reports in 2015, a land development project of the Kaisa Group involved Jiang Zunyu, a former member of the Standing Committee, secretary of the Political and Legal Affairs Commission in Shenzhen, and a direct subordinate of Zhou. Jiang was investigated by Chinese authorities on Oct. 13, 2014.

Guo sent a written report to the CCP’s Discipline Inspection Commission, admitting that he and Jiang were involved in some “gray areas” together.

Another senior official Kaisa was linked with was Yang Xiancai, a senior judge and former head of the Guangzhou High Court’s Executive Bureau—and Zhou’s subordinate. In 2010, Guo confessed to bribing Yang with $130,000, to put pressure on Zhong Hua, the developer of Sinopec Tower in Guangzhou, to sell the property to Kaisa for less than market value. The project later became one of Kaisa’s flagship projects and made hundreds of millions of dollars, according to state-owned China News.

Despite Zhong’s denial, the court recognized that Yang approved the deal. Zhong said he did not receive a single penny. “They were in cahoots, I was … cheated.”

Yang was later sentenced to life imprisonment, while Guo was exempt from punishment for cooperating with the authorities by testifying.

Kaisa Group is also tied to the “Zhongxu gang” of Zhou Bin, Zhou Yongkang’s son. The front operator of the “Zhongxu gang” was Wu Bin, known as “money bags” and “top butler” of Zhou’s family, who apparently owned Zhongxu investment company, had a stake in Kaisa Group’s Chengdu Lijinggang project, according to Jiemian, state-owned financial media based in Shanghai.

Wu also had business interests in Fantasia Holdings. In January 2015, Fantasia’s property in Shenzhen was also locked down following the official lockdown of Kaisa’s property in November 2014. The founder of Fantasia, Zeng Bao Bao, is the niece of former Vice President Zeng Qinghong, who, along with Zhou Yongkang were hardcore supporters of Jiang Zemin, known as the “Jiang faction.”

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.


Kathleen Li

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