Trouble began for the second largest Chinese real estate company, China Evergrande in 2021 when it defaulted on its payments, but survived because of the short duration in spurt in the property segment of the economy. But it has reached a deeper critical point as it is unable to offer international creditors a credible debt restructuring plan.

And on Wednesday, according to reports that Western media is unable to confirm, owner of Evergrande Hui Ka Yan has been placed under police surveillance, which is short of a formal detention. But he cannot meet anyone, cannot travel and he would have to surrender his passport. It is a dramatic fall in fortunes for Hui, who was ranked the richest Asian by American business magazine Forbes with wealth of over $45 billion. But his wealth has fallen to around $3 billion, and the company owes over $300 billion to foreign creditors.

Hui’s is a classic story of rags to riches. Born in a poor family, he graduated in engineering and worked as a worker in a steel plant for 10 years before he set off on his successful climb as an entrepreneur when he founded Evergrande in Guangzhou in the southern province of Guangdo. It has been noted that his expansion has been achieved on the back of debt, which is seen as a legitimate market strategy. But it is when the Chinese economy slowed down, and the property sector was unable to grow that the liabilities began to accumulate to the extent that it became impossible to keep up with the payments.

The question was whether the Chinese government would rescue Evergrande on the principle of “too big to fail” because if Evergrande falls the economy would sink into a crisis. Though the Chinese government did bring down the mortgage rates, it does not seem eager to intervene in the market to save big private players like Evergrande going into bankruptcy. This raises the question of how the Chinese government views the market economy it has allowed to grow since the Deng Xiao Ping reforms of more than 40 years ago. It is a fact that it is the market forces that helped China to become the engine of global economy and the second largest economy after the United States.

In the last few years, since the end of the Covid pandemic in 2021-22, the Chinese economy has been struggling to recover its pre-pandemic highs in economic growth but it has been facing problems. The woes of Evergrande partly arise from the general economic situation in China. Many of the doomsayers have been predicting that the Chinese economy is going the Japanese way, and that even as Japan’s economy has not recovered from the slump of the 1990s in the last three decades, China too is unlikely to recover from the slowdown it is experiencing now.

But no one is yet to write off China and there is the expectation that China will make a comeback and though it may not grow at the feverish pace of 10 per cent growth of over 30 years, it will clock reasonable rates of growth and it will remain the top economy for a long time to come.

It appears that the fluctuating fortunes of tycoons like Hui will not affect the Chinese economy, and that it has reached a stage where billionaires many change but the economy will remain vibrant.

And there is also the suspicion that the Chinese government would want to come down heavily on tycoons who have been trying to grow too big like Jack Ma of Ali Baba and Tencent, or they did not play according to the rule as it seems to be in the case of Hui. In the case of Hui, he has been close to the leaders of the Chinese Communist Party and his fault seems to be economic and not political wrongdoing.