Xu Jiayin has pleaded guilty and expressed remorse, while over 50 billion yuan flowed out of the country. How exactly was this massive amount of money transferred abroad? Many question how such a large sum could be moved overseas when ordinary individuals face scrutiny for transfers exceeding 50,000 yuan. Should banks be held accountable? This analysis explores the actual methods wealthy individuals use to transfer capital abroad, which differ significantly from common perceptions.
First, regarding the exact amount Xu Jiayin transferred overseas, the truth is no one knows for certain. What is clear is that the Xu family extracted more than 50 billion yuan in dividends from Evergrande. Previously, it was reported that Xu Jiayin used a technical divorce to separate assets, leaving debts under his name while transferring assets to Ding Yumei, meaning Xu Jiayin currently holds no assets in his own name. However, last year, the Hong Kong High Court issued a worldwide restraining order explicitly prohibiting Xu Jiayin from disposing of assets valued up to $7.7 billion (approximately 55 billion yuan) globally. Even earlier, a Hong Kong court had issued a restraining order on Ding Yumei's assets worth 60 billion Hong Kong dollars. This suggests the Xu family's total assets could amount to hundreds of billions. Regardless of the exact figure, the amount transferred overseas is undoubtedly enormous.
So how was the capital moved abroad? Unlike ordinary individuals who might transfer funds directly from personal accounts to overseas accounts, Xu Jiayin used corporate channels, specifically through dividend distributions. He employed a highly complex corporate structure to control Evergrande. Xu Jiayin did not hold Evergrande shares directly but controlled the company through offshore entities. A breakdown of Evergrande's structure reveals that Xu Jiayin established a company in the British Virgin Islands called Xinxin (BVI) Limited, which he wholly owns. Evergrande's Hong Kong-listed entity, China Evergrande Group, is incorporated in the Cayman Islands. Xinxin (BVI) Limited holds approximately 59.78% of China Evergrande, giving it controlling interest. Xu Jiayin's domestic holding platform, Kailong Real Estate, is fully owned by Xinxin (BVI) Limited, and Kailong Real Estate wholly owns Evergrande Real Estate Group. Other Evergrande subsidiaries, such as Evergrande Property and Evergrande Auto, are controlled through similar structures.
In simple terms, Xu Jiayin established companies in tax havens like the Cayman Islands and the British Virgin Islands, using these entities to control listed companies in mainland China and Hong Kong. When Evergrande's mainland operations generated profits, dividends were paid to the shareholder company Kailong Real Estate, then transferred to Xinxin (BVI) Limited, and finally reached Xu Jiayin's personal account. This pathway is fully compliant with regulations and is not subject to transfer limits. It only requires submitting documents such as board resolutions on profit distribution, annual audit reports, and tax clearance certificates. This is the legal route through which Xu Jiayin transferred tens of billions in dividends overseas.
In reality, Xu Jiayin is not alone in using this model. Many real estate developers and internet giants employ similar strategies, registering companies overseas and establishing offshore trusts. For instance, Jack Ma has purchased numerous overseas mansions, vineyards, yachts, and other assets. How was the capital for these acquisitions transferred abroad? Certainly through legal channels. The scrutiny on Xu Jiayin's case intensified only because of Evergrande's collapse.
However, Xu Jiayin's use of financial fraud to distribute dividends and drain the listed company's resources is illegal. Consequently, the liquidators have sued in Hong Kong court, seeking to recover approximately $6 billion (around 43.8 billion yuan) in dividends and compensation paid to Xu Jiayin, Ding Yumei, Xia Haijun, and related companies. These funds were obtained through financial fraud in 2019 and 2020.
Once dividends are transferred overseas, they can be used for investments such as real estate, bonds, insurance, and family trusts. The Xu family owns luxury properties in the UK, Canada, Hong Kong, and other locations, along with assets like private jets and luxury vehicles. Purchasing bonds is a way to generate further returns. Evergrande issued US dollar bonds exclusively for senior executives like Xu Jiayin, offering very high interest rates. After distributing large dividends, the funds were used to buy Evergrande's high-yield bonds, effectively extracting even more value from the company. This practice exacerbated Evergrande's debt burden while enriching Xu Jiayin and others.
Additionally, a $2.3 billion trust was established in the US to benefit future generations of the Xu family. Through a decade of continuous dividend distributions and subsequent reinvestment, the Xu family's assets have expanded far beyond 50 billion yuan, potentially exceeding 100 billion.
Since Xu Jiayin and Ding Yumei have refused to disclose detailed asset information, only about 55 billion yuan in assets have been frozen so far. However, the liquidators have identified bonds worth 350 billion Hong Kong dollars. It is important to note that the assets are currently only frozen; whether they can ultimately be used for compensation depends on legal proceedings. In summary, fully recovering the Xu family's assets will be a lengthy and challenging process.
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