Evergrande's billionaire founder has been bailing out the business
 Evergrande is staring down about $8 billion worth of debt obligations due to foreign investors over the next year. The company's billionaire founder and chairman may have to pay at least some of that out of his own pocket.
The embattled conglomerate has become the poster child of China's property crisis. Fears that the real estate developer could default and spark a contagion effect roiled global markets in September. In its latest financial stability report, the United States Federal Reserve warned that "stresses in China's real estate sector could strain the Chinese financial system, with possible spillovers to the United States."
Evergrande has managed to meet some interest payments and stave off a collapse, at least for now. But a slew of new payment deadlines will soon expire. On Wednesday, a 30-day grace period is up on some $148 million worth of interest payments that the company already missed deadlines on.
So far, there's been little clarity on how the company will shore up more cash. It's been trying to sell some of its assets — from a partial stake in its car business to an office tower in Hong Kong — but hasn't had much luck.
The company has roughly $8 billion worth of interest payments or principal on offshore bonds that are coming due over the next year, according to analysts from Moody's and S&P Global Ratings.
Enter the company's founder, Xu Jiayin. Bloomberg reported late last month, citing anonymous sources, that Chinese authorities have told Xu to use his personal wealth to pay the company's debts.
The company did not respond at the time to a CNN Business request for comment about that report, and Evergrande has largely stayed silent on its debt payments, even as bills have come due. But suggestions that Xu's debt repayment strategy may be getting personal aren't going away.
Local media in Hong Kong recently reported, citing information from a land registry, that Xu is using a mansion in the city as collateral to secure bank loans. And the Wall Street Journal reported last week, from anonymous sources, that Evergrande raised more than $50 million by selling two of its private jets.
The government is "clearly setting the example of excessive risk taking, which is something the Chinese government is very keen on eliminating" said Peter Cai, a China analyst from the Lowy Institute, an Australia-based think tank. "By making an example of these billionaires who have taken way too much debt for their companies, I think it's a way to demonstrate the government's resolve."
Evergrande's debt saga is a dramatic reversal for Xu, whose rise to success mirrors China's broader economic ascent. He grew up impoverished in rural China. His father was a warehouse worker and his mother died when he was a baby. He worked at a steel mill before starting Evergrande in 1996.
The company rode the boom of home buyers rushing to urban cities, as hundreds of millions of people across China were lifted out of poverty — a change that created metropolises from villages. Evergrande alone built more than 1,000 developments in hundreds of cities and claims it creates more than 3.8 million jobs a year.
Property supercharged China's economy, and has ballooned to account for as much as 30% of China's GDP. Cheap money also fueled developers to keep building: Evergrande, for example, expanded into bottled water, electric cars — even pig farming.
By 2017, Xu became Asia's richest person, and was famous for his extravagant lifestyle and taste for luxury.
During one of China's annual legislative conferences, Xu went viral online for wearing a black suit with a flashy Hermès gold belt, earning himself the moniker "belt brother." And according to the book "Red Roulette" by Chinese businessman Desmond Shum, Xu once ordered his private jet to fly empty to Paris, while he played cards with a friend in another jet headed for the same place.
While Xu was an archetype of China's crazy rich, he also successfully aligned himself with Beijing and the ruling Chinese Communist Party — at least for a while. He was known as a philanthropist and is a member of China's Political Consultative Committee, which advises the government on policy.
"All I have and all that Evergrande Group has achieved were endowed by the Party, the state and the whole society," Xu said in a 2018 speech.
But that strategy failed last year, when Beijing started to crack down on unrestrained borrowing in real estate — an ongoing issue in China, where the housing market has been cooling for some time. In August 2020, the Chinese government unveiled a "three red lines" policy to limit debt from developers, which analysts say has contributed to the liquidity crisis now unfolding at Evergrande and other developers.
"There's been a decision at the very top, that this buildup of reckless credit expansion is becoming a danger to China and presumably a threat to the Party rule," said Leland Miller, the CEO of China Beige Book.
Chinese President Xi Jinping is rewriting the rules in the world's second-largest economy — a dramatic upheaval he's attributed to a desire to close the wealth gap, but which experts also attribute to a desire for further control.
A regulatory crackdown has also swept through industries ranging from tech and education to fan culture and video games. But real estate poses its own, enormous economic and social threat: Nearly three-quarters of household wealth in China is tied up in property, and the Evergrande crisis has led to protests from employees, contractors and homebuyers.
The stakes are high: Beijing wants to make an example out of Evergrande, but the government also needs to avert a collapse that could endanger an already slowing economy.
"I think it's almost certain that the government is going to find way to bail it out while making it look as essentially the bailout was done so by the private sector, even though the government's hand was behind it," Mitter said.
It seems unlikely that Xu, Evergrande's founder, could handle everything on his own. Evergrande is China's most indebted developer and it has some $300 billion in total liabilities. His personal wealth is valued at about $7.2 billion, according to the Bloomberg Billionaires Index.
Pushing Xu to pay the debts himself is "of much greater symbolic value, than offering actual ability to make a dent in the amount of money owed," said Cai of the Lowy Institute.
Beijing, meanwhile, has repeatedly said that the situation is controllable, even as authorities have acknowledged what they call "individual problems" in the property market.
However China attempts to resolve the issue, the government's efforts to more tightly regulate the real estate industry may be creating new risks, even as it eliminates old ones.
"For decades, we've been used to a high growth model where property pumps enormous amounts of credit into the economy ... and when growth needs a little pick me up, then more building gets done," Miller said. "We are going from an era of high to medium growth to an era of low growth in China."  Selina Wang is an international correspondent for CNN, reporting on key stories from the Asia-Pacific region.   Covid overdrive Residents queue for Covid tests at a residential compound on Friday night in Chengdu. The metropolis in southwest China has rolled out stringent measures to curb infections, as a renewed outbreak continues to spread across the country. Authorities have also expanded the definition of "close contact" — people whose mobile phone signals are detected near the signal of a confirmed Covid case are now considered at risk of infection, even if they haven't been in direct contact. In Chengdu, police have detected 82,000 people using the new method. A delegation of United States lawmakers arrived in Taiwan on Tuesday sparking immediate condemnation from China, with Beijing describing the trip as an "act of provocation."
The unspecified group landed in Taipei on a Boeing C-40A military plane shortly after 6 p.m. local time, according to flight details by Flightaware. The plane subsequently took off for Okinawa after a brief stay at the airport.
Taiwan's Ministry of Foreign Affairs confirmed the visit and said the trip was arranged by the American Institute in Taiwan, the de facto US embassy in Taipei. It did not disclose the names of the lawmakers involved in the visit, nor their itinerary.
When approached for comment, the American Institute in Taiwan did not confirm the list of lawmakers but directed CNN to Sen. John Cornyn's office for information, a Republican from Texas.
Relations between Taipei and Beijing are at their lowest point in decades, marked by fiery rhetoric and military posturing. Last month, China's military sent a record number of warplanes into Taiwan's air defense identification zone (ADIZ) — the area surrounding the island where Taipei says it will respond to any incursions.
In a statement, China's Ministry of National Defense condemned the US for "grossly interfering in China's internal affairs" and said it should stop "provocative actions" that may escalate tensions on the Taiwan Strait.
"(The US) should refrain from sending wrong signals to 'Taiwan independence' forces," the statement read. "The People's Liberation Army will always be on high alert and adopt all necessary measures to resolutely smash any interference by foreign forces and separatist attempts."
Beijing views the self-ruled island as an inseparable part of its territory — even though the Chinese Communist Party has never governed Taiwan.
The visit comes as China conducted what it characterized as a "combat readiness patrol" near the Taiwan Strait on Tuesday.
The drills were conducted to "further improve the joint combat capability of multiple military services and branches," said Senior Colonel Shi Yi, spokesperson for the PLA Eastern Theater Command, according to state-run tabloid the Global Times.
In a press release on Tuesday night, Taiwan's Ministry of National Defense reported that six Chinese warplanes entered its southwestern ADIZ that day.
This isn't the first time a delegation of US senators has flown to Taiwan. In June, an American delegation including Sen. Tammy Duckworth, landed on a US Air Force C-17 Globemaster III freighter to announce the donation of 750,000 doses of Covid-19 vaccine. And previously, US officials and politicians have flown to Taiwan on the C-40, a military version of the Boeing 737 commercial airliner.
— By Eric Cheung and Helen Regan Around Asia
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