Last year one of China’s leading property service firms was under investigation for its handling of deposits for undeveloped homes by prospective buyers. The company was Evergrande Property Services, a unit of the developer Evergrande Group, and the misuse of deposit funds led to the resignation of the CEO and CFO. The scandal also raised questions about the future of the company and its ability to pay back its significant loan portfolio. Last week many analysts’ fears came true, and Evergrande filed for bankruptcy.
The bankruptcy proceedings have been well documented in Western newspapers, but the larger story that is being followed in China is much less well known. Chinese social media sites have been abuzz with rumors of the Chairman of Evergrande’s “technical divorce” from his wife. The theory is that divorce would release her from having to pay back any of the loans that the company owes, which are said to be almost twice as much as the company’s assets. Ding Yumei, the wife of the chairman, has been named the 26th richest self-made woman, so there is plenty of reasons for her to want to distance herself from this bankruptcy. The company did respond to media questions about the alleged divorce but only to say that they had “no information” about it.
As more Chinese property firms struggle, there is more attention being paid to the way that the government treats such an important part of the economy. Some fear that the leaders of companies, who are likely close with the ruling political party, will be bailed out while ordinary citizens and investors will be left to pay the bills. If Mrs. Yumei is able to walk away from the mess left by Evergrande unscathed, then many of those fears will turn out to be valid.