Evergrande Founder’s Arrest May Be the Beginning of a Larger Purge, Experts Say

Xu Jiayin reportedly confessed to illicit financial dealings with a large number of high-ranking officials. They should be nervous, say China watchers.

Xu Jiayin, chairman of the board of Evergrande Group, speaks during a news conference in Beijing, China, on March 6, 2016. Etienne Oliveau/Getty Images

Following the September arrest of Evergrande chairman Xu Jiayin, Chinese social media has been awash with revelations about the former billionaire. Mr. Xu has reportedly confessed to collusion with a large number of high-ranking officials, with whom he had illicit financial dealings.

One China analyst believes Mr. Xu’s arrest was just the tip of the iceberg, paving the way for a widespread purge by Chinese leader Xi Jinping, with the goal of shifting blame for the real estate crisis and cutting short potential opposition to Mr. Xi.

“The admission of Xu Jiayin’s ties to high-ranking officials has sent shockwaves throughout China,” according to a report last week on YouTube channel “China Truths,” a production of digital platform Ganjing World.

China Truths reported that Mr. Xu had financial ties with numerous high-ranking Chinese Communist Party (CCP) officials. In all, the web of influence included “19 individuals, 88 provincial-level officials, and over 670 department-level officials, and is linked to financial transactions totaling an astonishing 1.6 trillion yuan, about $218.71 billion.”

Soccer Bribes, Dance Troupe Scandal

According to one online report, Mr. Xu spent nearly 270 million yuan (about $37 million) to foster relationships with China’s General Administration of Sport and the Football Association. He reportedly paid 80 million yuan (about $11.14 million) in bribes to the sports administration’s deputy director and bribed a number of soccer administration officials, including some who were arrested earlier this year.

Evergrande purchased Guangzhou Football Club for 100 million yuan in 2010, subsequently changing its name to Guangzhou Evergrande Football Club. The Evergrande name became synonymous with China’s booming soccer scene as it poured money into the sport in the hopes of becoming a world soccer power.

Until very recently, soccer—a pet project of Mr. Xi—was big business in China, and other real estate developers followed in Mr. Xu’s footsteps. According to an Oct. 5 Time Magazine report, “the collapse of China’s real estate market wasn’t a surprise to anyone who followed Guangzhou Evergrande—or the fate of Chinese soccer more broadly, which has long been tied to the health of its real estate industry. In 2021, 11 of the 16 teams of the CSL were owned by property developers—and nearly all now face funding crises.”

Chinese media has also been buzzing lately with stories about Mr. Xu’s Evergrande Song and Dance Troupe. Founded in 2010, the performing group featured hundreds of dancers. Its annual budget was enormous, with wages alone costing about 100 million yuan ($13.7 million) annually. Salacious rumors allege that the troupe’s duties went far beyond dancing; the performers were said to offer private services to Evergrande’s executives or CCP officials.

Reportedly, even though Evergrande was in a financial storm in recent years, with layoffs and salary cuts for its regular employees, the troupe remained unaffected.

Power–Money Collusion

In China, for a company to become as big as Evergrande, there must be power–money collusion behind the scenes, with officials from various government agencies giving it the green light.

Independent commentator Zhuge Yangming told The Epoch Times that if the revelations about Mr. Xu’s financial dirty dealings are true, the implicated officials at all levels will definitely feel uneasy, wondering whether they have also been exposed.

And if the revelations were made at the behest of Mr. Xi, those unlucky officials are likely to be the next targets of the political purge.

“The most nervous officials at the moment are those who have accepted Xu Jiayin’s bribes but are not yet in trouble,” commented one online post.

According to an anonymous source within China with knowledge of the situation, “All the information that has been posted online is true, but what has been made known is [relatively] nothing. A lot of other things have not been made public. They are so shocking that people just can’t handle it.”

The ‘White Glove’

Mr. Xu was known to be a “white glove” for CCP interest groups, particularly for prominent political figure Zeng Qinghong.

In China, a “white glove” is an intermediary who conducts a business in the foreground with CCP elites backing him. A white glove “does the dirty work,” allowing CCP officials to keep their hands clean.

As a white glove, Mr. Xu most likely did not expect that the CCP would sacrifice him to address the real estate debt crisis. However, Mr. Xi clearly didn’t care to follow the old rules.

Mr. Zeng, whose family owns Fantasia Holdings Group, a large property developer, was a close ally of former CCP general secretary Jiang Zemin. He was instrumental in helping Jiang hold onto power. For years, Mr. Zeng was the primary force behind the CCP’s organization and personnel and controlled the pro-Jiang faction.

Due to Mr. Xu’s relationship with Mr. Zeng, the situation takes on a significant political dimension. Mr. Zeng’s patronage helped facilitate Mr. Xu’s remarkable rise to power. However, ultimately, it was a liability.

“I think Xi Jinping is worried that the anti-Xi forces would form an alliance with Zeng Qinghong’s family, and if that happens, he will be in even greater trouble. That’s why he wants to handle Xu Jiayin’s case quickly and use this opportunity to crack down on the Zeng family,” Mr. Zhuge said.

Mr. Xu is in an unfortunate position. Former Chinese journalist Li Feng told The Epoch Times that Mr. Xu’s arrest may be a setback for Mr. Zeng’s faction. However, it’s hard to predict whether Mr. Xi will take action against Mr. Zeng directly.

“If Xi Jinping now affects Zeng Qinghong’s interests, such as Zeng Qinghong being investigated or deprived of his family’s interests as a result of Xi’s anti-corruption campaign, the two sides may end up in a hostile and incompatible situation,” Mr. Li said.

“At the same time, they both know that to protect their own interests, they must retain the CCP’s rule,” he added.

“So in the end, the two may reach a compromise and make some kind of political alliance, and maintain the current relationship,” Mr. Li said. The scapegoating of Mr. Xu may be part of that compromise.

Shifting Blame

Japanese journalist Akio Yaita, director of the Taipei branch of Japan’s Sankei Shimbun national newspaper, said in a Facebook post that he believes that Mr. Xi has another main purpose in arresting Mr. Xu, which is to shift the responsibility for China’s economic deterioration onto others.

In the future, if migrant workers aren’t paid, or properties aren’t delivered to buyers who have paid for them, it will be convenient to blame it all on Mr. Xu, Mr. Akio said.

“After the arrest of Xu Jiayin, other big names in the private sector may also run into trouble,” said Mr. Zhuge. The purge, and the scapegoating of Mr. Xu, might take pressure off in the short term.

Nonetheless, he said, “No matter who Xi Jinping arrests, it won’t change [China’s] economic decline, and it will only make the CCP’s crisis more and more dangerous.”

Lynn Xu contributed to this report.