The Chinese Communist Party (CCP) is auditing the assets of China Evergrande Group and Evergrande Chairman Xu Jiayin, according to Reuters. People familiar with the matter also said that Evergrande’s liquidity is severely lacking. In addition, previous methods of restructuring state assets may not be suitable for Evergrande.

Reuters reports that the audit shows that Beijing is taking over Evergrande after it defaulted on two foreign bonds. As a result, they are pushing Evergrande’s restructuring to settle more than $300 billion in debt.

Evergrande and other Chinese real estate companies have piled up debt in recent months, which has hit financial markets at home and abroad. Investors fear that this will have a ripple effect on a global scale.

Beijing has repeatedly tried to reassure investors but has not clarified how it plans to stabilize Evergrande.

Fitch rated Evergrande as a “limited default” after failing to pay $82.5 million in interest on two US dollar bonds last week. Evergrande has officially defaulted but has not yet filed for bankruptcy, liquidation, or other proceedings related to its suspension.

A source told Reuters that state institutions are now coordinating Evergrande’s newly created risk management committee. The results of the authorities’ investigation showed that Evergrande’s liquidity situation was more complicated than expected.

Although Evergrande’s debt is relatively straightforward, it needs more time to thoroughly list its assets’ inventory and status. Moreover, as the founder of Evergrande, Xu Jiayin’s fortune is still unknown to the public.

Another person familiar with the matter said that the most important thing is discovering Evergrande’s “real assets.” In the future, when the CCP owns Evergrande assets, the following entity can only be “partially sold.”

Xu Jiayin currently holds less than 60% of Evergrande’s shares. Before that, more than 277.8 million shares from Evergrande had been sold by force, reducing Xu Jiayin’s share ownership from 61.88% to 59.78%, as NTDTV reported.

Reuters reported in October that Chinese authorities had asked Xu Jiayin to sell part of his assets to help pay off debts to bondholders. Xu Jiayin has sold luxury properties, including art, calligraphy, and three luxury residences to pay some debts.

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