Xu Jiayin before he lost his freedom

Xu Jiayin probably didn’t expect that the back he left to this era was peach-colored.

Beginning in late September, along with the announcement of Xu Jiayin’s coercive measures, gossip and jokes about Evergrande’s song and dance troupe gradually flooded the Internet. Beauty, money, and the mysterious 42nd floor of Evergrande’s headquarters led to an image that entered the hearts of the public almost overnight. In the years before that, Xu’s carefully shaped shell of doctors, professors, entrepreneurs, and philanthropists had all disintegrated. Perhaps they had never really been established, because in comparison, the former was more in line with everyone’s imagination of the former richest man.

And those who don’t need to imagine, I mean those who can get close to Xu’s family, how close can they be to reality?

For example, the last image Xu Jiayin left for an employee of Evergrande Group turned out to be relaxation. During the conversation, those trillion-dollar debts are not a problem, "(Liabilities)Some can be talked about that way, some can be resolved that way ",It is said that Xu Jiayin believes that Evergrande only needs tens of billions of working capital to turn around again. In his opinion, "all solutions can be solved."

This optimism, which is in great contrast to reality, has caused confusion to the Evergrande employee. He does not know whether Xu Jiayin’s psychological quality is particularly good, or whether the people around him have created this illusion for him.

Speaking of which, this illusion comes more from the magic of time. Since founding Evergrande in 1996, Xu Jiayin has crossed the line of life and death several times. Like many real estate developers, they have collectively fallen into a kind of survivorship bias, thinking that "too big to fail". If they want to fail, it can only be because it is not big enough, so they are desperately high turnover, high leverage, and high debt, using the lowest cost, highest debt, and most complex moves to pry the largest scale.

This is the famous "three highs and one low". Until the thunderstorm, not only Evergrande, but most of their peers have always believed in this "real estate philosophy".

Obviously, not everyone is as "optimistic" as the founder, and Evergrande executives have long said privately that "the end of this journey is Xu Jiayin’s last moment."

The "silver bracelet" was slowly tightened.

In early September, a number of executives of Evergrande Wealth were taken away. It is understood that because of their deep involvement in Evergrande Wealth, Xu Jiayin’s second son, Xu Tenghe(Peter Xu)It was at that time that he was arrested. Not long after his son lost his freedom, on September 27, the media reported that "Xu Jiayin was recently placed under residential surveillance." Paradoxically, the next day, China Evergrande announced that the company had received a notice from the relevant departments that Xu Jiayin, the executive director and chairperson of the board of directors of the company, had been taken compulsory measures according to law for suspected illegal crimes.

This was obviously a more severe wording. Among all the coercive measures, residential surveillance was a relatively light one, and the "coercive measures" in the announcement were relatively heavy.

First, copy Yao Zhenhua and surpass Yao Zhenhua

Since crossing the line of life and death in 2008, Evergrande has been on the road to "going big" all the way. A large group is of course structural, so Evergrande’s "big" belongs to the structural big, including business structure, capital structure and shareholder structure. At one point, Xu Jiayin used several superimposed words to describe Evergrande’s strategy – "big big, close, buy buy buy, circle, good".

The complexity of Evergrande’s business structure is now well known and needless to say. As for the capital structure, Xu Jiayin suffered a big loss of "no money" in the early years. In 2008, he got the life-saving money by "hoeing the earth" with Hong Kong bosses. Real estate is essentially a game of cash flow, soXu Jiayin realized that to make the business bigger, we must first solve the problem of cash inflow. Only by increasing the leverage ratio of the company can we form a higher return on equity funds. To achieve this, we must realize the pre-financing stage and diversify the financing methods.For example, in the land acquisition stage, take pre-financing to access lower-cost funds.

If you rely on the Financial Institution Group public to public, then the cost of financing is difficult to come down, we must find another way.

Opportunities always fall from the sky. In 2012, in order to solve the problem of "difficult and expensive financing" for real enterprises and promote economic growth, financial innovation was encouraged to develop. In May of that year, the "Implementation Opinions on Encouraging and Guiding Private Capital to Enter the Banking Industry" was issued, which clearly stated that "private enterprises can invest in the Banking Financial Institution Group by initiating the establishment, subscribing for new shares, transferring equity, mergers and acquisitions and restructuring." In October of the same year, the Securities Supervision Commission promulgated "one law and two articles", and brokerage funds joined the army of financial innovation. At the end of the year, the channels for venture capital investment were greatly liberalized. It was also that year that the P2P industry entered a period of explosion, and the number of platforms rapidly increased from 50 in 2011 to about 200 in 2012.

Under the tide of financial innovation, the bosses with a keen sense of smell noticed the huge opportunities contained in it, and they applied for financial licenses one after another under the guidance of experts. Yao Zhenhua’s Qianhai Life Insurance was approved to be established in that year, and three years later, through investment-linked insurance, universal insurance, and the huge funds raised by allies of the Financial Institution Group, the capital markets were turned upside down and set off monstrous waves.

In early 2015, Foresea Life Insurance began to quietly buy Vanke’s class A shares. Before the market noticed Yao Zhenhua’s true intentions, Xu Jiayin may have known Yao Zhenhua’s plan. In March, Xu Jiayin found a well-known financial boss from Henan, respected as "big brother", and invited him to buy an insurance company together, but was declined.

In July of that year, Yao Zhenhua suddenly raised a placard, and a "battle of treasure and ten thousand" opened the curtain. The "brilliant record" stimulated Xu Jiayin, and also made Xu Jiayin more convinced that "it is better to ask for others than to ask for yourself". It is the last word to master the "money bag" – to become bigger and bigger, you must control the Financial Institution Group yourself.

On November 22, 2015, Evergrande Group acquired a 50% stake in Chongqing-based Sino-Singapore Great Eastern Life Insurance Company for 3.939 billion yuan, renamed Evergrande Life Insurance, and officially announced its entry into the insurance industry. Evergrande Financial Group was also established in Qianhai, Shenzhen, and Xu Jiayin began to "collect licenses".

After that, Hengda’s financial layout flourished in an all-round way. According to First Financial, according to public information, that year, Hengda Group won a full set of financial and financial services such as insurance, Internet finance, financial leasing, financial asset exchange, and factoring in one go.

It was widely rumored in the market that Evergrande was preparing for private banks. Until a few trading days from the end of February 2016, Evergrande through its wholly-owned subsidiary Evergrande Group(Nanchang)Co., Ltd.(Hereinafter referred to as "Hengda Nanchang")Acquired 577 million H shares of Shengjing Bank, and later passed two acquisitions to acquire 1.0168 billion domestic shares of Shengjing Bank for 10.068 billion Hong Kong dollars, and finally became the largest shareholder of the bank.

To apply for a new license, you need to queue up, even if the license is down, you have to do the scale first, and at that time, Shengjing Bank with assets of more than 700 billion yuan was a ready-made big standard. It is worth noting that in 2011, the Founder Department controlled 8.12% of the shares of Shengjing Bank, collecting major financial licenses such as securities, funds, banking, insurance, and futures, which can be described as aggressive. After the collapse of the Founder Department, Xu Jiayin regained this license and became one of his most important "money bags" in the future.

Although the Founder Department has become a "ruin", Xu Jiayin does not think that he will repeat the same mistakes, but has accelerated the pace of model replication. In September 2016, Xia Haijun, the former vice chairperson of the board of directors of Evergrande Group, said at Evergrande’s interim results conference that the future may be ready to acquire some small real estate developers and Financial Institution Group, especially securities companies and trust companies will have merger and acquisition plans, and the future group will form a financial and real estate juxtaposition pattern.

At the 2017 work conference, Xu Jiayin directly proposed that the goal of Hengda Financial Group in 2017 is to achieve full financial licenses such as shareholding, holding banks, insurance, securities, trusts, public funds, and Internet finance.

To build a financial empire, it is not enough to have only a license plate, but also people and allies.

Evergrande also has ready-made allies. As early as March 2015, China CITIC Bank, CITIC Trust and Evergrande Group signed a 60 billion strategic cooperation agreement, in which China CITIC Bank 40 billion credit to Evergrande Group. In February 2016, China CITIC Bank Chongqing Branch landed Evergrande Life Insurance’s 1.969 billion yuan M & A loan project. In December 2016, China CITIC Bank Guangzhou Branch invested 31.20 billion yuan in real estate funds to Evergrande Group. In early 2017, China CITIC Bank reached a "100 billion +" cooperation agreement with Evergrande Group.

Yes, China CITIC Bank was once Evergrande’s largest "top gifter". At that time, the president of China CITIC Bank was Sun Deshun, and the vice president was Zhu Jialin. In September 2017, Zhu Jialin resigned from CITIC Bank to become the vice president of Evergrande Group and chairperson of Evergrande Life Insurance.

This is the "revolving door", and it is not just Zhu Jialin who pushes open the "revolving door" between China CITIC Bank and Evergrande. Zhang Qiang, former vice president of China CITIC Bank, was hired as the president of Shengjing Bank in February 2018; Shen Guoyong, former general manager of China CITIC Bank’s head office institutional business department, went to Shengjing Bank as the vice president in January 2019, and so on. The management of Shengjing Bank was completely replaced by executives from CITIC Bank. China CITIC Bank was not only Evergrande’s most important ally at the time, but also its "talent pool" in the financial sector.

In addition to the executives of China CITIC Bank, there are also people in the regulatory department who have pushed open this "revolving door". The head of the regulatory unit where China New Great Eastern Life Insurance was originally registered "went to sea" in 2016, shortly after Evergrande won the license, and became the vice chairperson of Evergrande Life after the renamed.

Interestingly, Yao Zhenhua also has an executive from Shenzhen’s insurance regulator. But in comparison, Xu Jiayin is "better" than Yao Zhenhua, whether it is the size of the host bank ally or the level of the executives recruited.

Of course, the final hole was even bigger.

Second, willing to spend money, "good at" spending money

At the height of the relationship, Citic also appeared in Evergrande’s list of strategic investors. In 2017, Evergrande introduced strategic investors in three installments. One of the earliest batch of strategic investors – Hexin Hengju, which is controlled by CITIC Trust.

That year, to return to A as a gimmick, Hengda completed the diversification of the shareholder structure, the Financial Institution Group, partners, and Xu Jiayin’s prominent friends, all circled into this circle. You know, at the beginning of that year, Hengda’s pre-financing interest rate to 20% + was difficult to borrow funds, but attracted a total of 130 billion war investment.

However, with the passage of time, many glossy stories took off their "coat" and still revealed their "underpants". Today, there is a considerable amount of moisture in this 130 billion’s battle investment.

"Most Words" learned that in Hengda’s war investment, more than one source of funds is a joint-stock bank with close ties to Hengda and the city commercial bank it once controlled.

What can be used as confirmation is that in August, China Evergrande(03333.HK)It is worth mentioning that the 2021 annual report disclosed by China Evergrande clearly pointed out that 16.50 billion yuan of the strategic investment introduced by Evergrande Real Estate in 2017 was a liability, which is obviously different from the announcement information issued by China Evergrande on November 22, 2020.

According to various market parties, this amount is much smaller than the funds that Evergrande has freed up from controlled institutions and allies. With many war investors doing business with Evergrande itself, it is difficult to determine whether the investment is a left-handed investment.

In August 2017, Hengda Life Insurance, a "Hengda" insurance company, quietly bought shares in Xuzhou Suning Real Estate Co., Ltd. and Zhenjiang Suning Real Estate Co., Ltd., which are owned by Ning. On September 20, Xu Jiayin and the senior management team of Hengda Group visited the headquarters of Ning Group and met with Zhang Jindong. The two sides said that they would carry out strategic cooperation in real estate, e-commerce, finance and other fields.

More than a month later, on November 6, Hengda Group announced that China Hengda’s Kailong Real Estate, Hengda Real Estate and its controlling shareholder Xu Jiayin signed a capital increase agreement with six institutional strategic investment institutions, introducing a total of the third round of strategic investment 60 billion, 6 institutions obtained about 14.11% of the shares after the investment. Among them, Shandong Expressway Group(20 billion), Shang Group(20 billion)Zhengwei Group(5 billion)Jiayu Investment(5 billion)Yihe Investment(5 billion)Sichuan Dingxiang(5 billion)< unk > is in the column

Someone close to one of the war investors once told us that although the war investor invested money in Evergrande, Evergrande bought a lot of land from it, and the money earned from selling the land can already cover the funds of the war investor, which means that it "took the money earned from Evergrande and invested in Evergrande."

"But most of the bosses lost their pants, which were invested in real money," the person said.

But whether the real money comes from Hengda’s funds or the investors’ own funds is to some extent "close and distant". If it is a supplier of Hengda, it may really need "out-point blood". After all, Hengda is used to defaulting on accounts and paying for goods by commercial ticket.

To this day, a large number of suppliers are still weighed down by Evergrande, struggling to survive.

Some media have pulled out the Hengda supplier creditor list, the first is Nantong Sanjian, the second is Shengjing Bank, the third is Guangtian shares, the fourth is Gold Mantis, the fifth is E-House China, the sixth is Quanzhu shares, the seventh is World Bank, and the eighth is Shaanxi Construction Engineering.

Even some suppliers not only advanced funds for Evergrande, but were also fooled into betting on Evergrande.

Rumor has swirled among Zhejiang entrepreneurs that a company engaged in doors and windows spent 2 billion to buy products from Evergrande Wealth Management. The company is also a downstream supplier of Evergrande, and Xu Jiayin once lobbied the chairperson of the company, saying that Evergrande Wealth Management had a 10% return. But later, the overall redemption rate of this wealth management was only 10%.

After several years, Hengda has built a trillion-dollar financial empire, ostensibly achieving a low-cost source, but in fact, it is a huge transfer of funds, layers of nesting, real debt, and high interest rates. It is no different from other once-famous and rapidly collapsing capital systems.

To achieve such a deception trick requires the help of professionals, and only after working in the financial field for many years can this delicate "exquisite game" be designed and implemented.

Xu Jiayin is very generous in recruiting talents, not only giving high salaries to hire financial professionals, but also recruiting research talents. In December 2017, Xu Jiayin introduced well-known economists with 15 million annual salary. Less than a year later, Evergrande found the president of the investment banking department of one of the four major banks and hired him as vice president in charge of financing. The annual salary is higher than that of 15 million.

It’s just that the person left after staying at Evergrande for half a year.

III. Where did you come from and where are you going?

Because in Evergrande, the financing pressure is too great. Although the assets are trillion, the liabilities are also two trillion, which means that Evergrande is like a monster in a state of hunger forever, and it needs continuous funds to maintain. In addition to selling houses to withdraw funds, it also needs to sell wealth management products.

Even Xu Jiayin has sold his wealth management, which shows that Evergrande’s full marketing and full financing are really not just talk on paper.

Generally speaking, if a large enterprise wants to manage well, there will be two paths, one is high incentive, the other is strong control, because the national real estate business management margin is too large, most companies will choose the first path, such as Country Garden and other companies to follow the investment plan, choose the second path is not much, because it is not easy to manage, but Hengda just took this path, probably because Xu Jiayin is a workshop director and is very good at SOP process design and management.

At Evergrande, there is a unique management model that Xu Jiayin sees as a magic weapon for maintaining long-term high growth – target plan management. "In management, usually target management and plan management are two separate chapters, Evergrande combines the two, and Evergrande’s plans are all targeted," the "professor" of Wuhan University of Science and Technology once said.

The so-called plan has goals, which should be similar to today’s popular OKRs, that is, the alignment and dismantling of goals, including sales and financing tasks. One Evergrande employee felt that the most stressful part of working in the company was the layered tasks. "There are always various tasks, selling wealth management products, how much a regional company wants to sell, all employees market and sell houses, and each department of the group has to take the task."

After receiving the task, they also need to make a big ranking. Everyone wants to be in the top six, and the current six will be praised. No one wants to be in the bottom six, because the last six not only have to be criticized, written reviews, but also deducted performance pay.

Once upon a time, when the marketing pressure on all employees was the greatest, many Hengda employees considered buying a house by themselves, and many employees also invested real money in Hengda’s financial management.

There are also many relatives and friends of employees who have also invested in Evergrande Wealth Management. Of course, it cannot be said that they are also forced by plans and tasks.On the one hand, at that time, Evergrande gave a higher return on investment than the market level. On the other hand, there were still many people who believed in "too big to fail" like Xu Jiayin.

You can’t say that they are completely wrong. To this day, both Hengda’s workout and delivery are still struggling to advance. For a company, it is actually the easiest to lie down and go bankrupt, but real estate is a people’s livelihood industry. Now Hengda and other companies are on the capital side, tying up various interests at home and abroad, B and C, how can the company fall down and let the actual controller go away.

According to Evergrande people, the current special class still hopes to properly solve Evergrande’s workout, "this will be a textbook case."

But the misunderstanding is also in this idea. With the long-term operation, private enterprise owners like Xu Jiayin often fall into a myth similar to the family world, such as painting the company with the Xu family completely equal. If the company cannot easily collapse, does it mean that the Xu empire will continue to Evergrande?

In fact, the fate of Fangzheng, Anbang, HNA, and other large enterprises and controllers had already given the answer. It was just that the latecomers were just lucky. The idea that they would sleep peacefully after binding their backers was purely an illusion, or a "life-saving straw" that they desperately wanted to grab when drowning.

Sun Deshun was investigated for corruption of nearly 1 billion yuan. The CCTV feature film "Zero Tolerance" revealed that during Sun Deshun’s tenure at China CITIC Bank, his main work direction was up the ante real estate loan, and he sought personal benefits. Sun Deshun fell, and the gears of Xu Jiayin’s fate began to turn. Although he also thought of ways and asked people, on the surface, he was short of "tens of billions of working capital, which can be rotated again." In fact, he had long been credit through the warehouse, and no one dared to rescue him. The Financial Institution Group, which was hollowed out and dragged down by him, was even more difficult to protect itself.

In the past, the disorderly expansion of debt will eventually be settled after the autumn. If Xu Jiayin can do his best to protect the property and finance the payment, he may be able to exchange for a slightly decent disposal.

But Xu Jiayin was still disappointed. As his patience ran out, he finally lost his freedom.

After Evergrande, there are still a number of private real estate enterprises on the verge of collapse of the capital chain. If the actual controllers do not pay for the property and promote financial redemption, their patience and time should not be much.

A friend of Xu Jiayin once summed it up with us, "Every entrepreneur has his era, and he also has the threshold of the era. The past is the door, and the past is the threshold. You know, when the era abandons you, he will not greet you, and you can’t even keep up with him."

It is time to encourage you together.