The Evergrande Group or the Evergrande Real Estate Group is not state-owned directly. However, a single sentence answer is misleading. Even though Evergrande is a private company, this article will explain that the Chinese Government controls it behind the scenes.
Does the Chinese government control Evergrande? We don’t need to explain. The Founder and Chairman of Evergrande Group, Xu Jiayin, have provided us with the answer. He said that the party gave everything the company possessed, and he was proud to be the party secretary of his company. In short, the Founder and Chairman of the Evergrande group is a CCP party official. (source)
Evergrande is not alone. Every company that does business in China is controlled by the Chinese Government directly. Let’s explain.
In the USA, Apple is one of the largest companies. Tim Cook is the CEO and also has an executive board. Apple shareholders select the board, and this board takes all the decisions for Apple. Under no circumstance would the US government force Apple to sit one government official on the executive committee. It will be a scandal in the USA if a US Government official takes a seat on the executive committee. It is considered unethical in the US to mix government jobs and take a private company position simultaneously. Not in China.
In China, the Government forces private companies to seat CCP party officials at the company executive boards. A company can’t operate unless they hire CCP party officials on top positions. This way, the Chinese Government knows the ins and outs of a company. This way, they are also actively involved in all company decisions. When the USA banned Huawei, it was one of the main reasons.
However, it does not end here.
In China, every company is forced to help the military with intelligence. This cooperation between the Chinese military and private companies was unofficial until 2017. However, CCP formalized it in 2017 with the introduction of a new national intelligence law. According to this law, every organization and citizen must cooperate in national intelligence work with the Chinese military.
Simply put, the Evergrande relationships with the Chinese Government aren’t like private sector company relationships with governments in the US.
We can confidently say that the Chinese domestic laws and administrative guidelines, unspoken regulations, and internal party committees make it quite difficult to distinguish between private and state-owned companies.
Therefore, we can say that on the surface, Evergrande is a private company, but in reality, it is Chinese state-owned. Chinese companies, in general, operate differently than American companies.
The quality of work that a Chinese property developer does is abysmal. Corruptions, not following regulations, and poor quality are rampant. If a company has a good relationship with the Chinese Government thrives, those don’t falter. The Government will ignore every corruption, mismanagement of a company if it has good backchannel connections. As a result, investing in a Chinese company, especially in Evergrande, is very risky.
We highly discourage investing in Chinese companies even if it is listed on the New York Stock Exchange.
There’s a great article in the Guardian about how the Chinese Government runs and controls businesses in China. You can read the article here.