China Graft Probe Snares Another Developer After Kaisa

Chinese authorities are probing a second Shenzhen property developer over ties to a former city official detained on graft allegations, widening an investigation that pushed Kaisa Group Holdings Ltd. to the brink of default.

Shenzhen Kingkey Group, builder of the world’s 11th tallest skyscraper, is being examined over suspicions that its executives had improper dealings with government officials, said people familiar with the matter. One is Jiang Zunyu, a former Shenzhen security official at the center of a graft probe, they said. Shenzhen blocked sales of at least 100 units from one Kingkey project, according to a government website.

The probe into closely held Kingkey adds to evidence of instability in Shenzhen’s real estate sector after the government opened an investigation into Kaisa over links to Jiang. Chairman Kwok Ying Shing resigned Dec. 31 and the company has since narrowly avoided becoming the first Chinese real estate company to default on U.S. currency debt. Kaisa is now in the process of being taken over by Sunac China Holdings Ltd.

Authorities have questioned Kingkey’s chairman, Chen Hua, several times, though he hasn’t been charged with any crime, the people said. Chen’s links to other officials are also being probed, according to the people. They asked not to be identified because the probe into Kingkey hasn’t been publicly announced.

Agile Chairman

A woman who answered the phone at Kingkey’s media office declined to comment when reached by phone. A Shenzhen government spokesman said the city doesn’t have any information about the matter.

Such investigations haven’t always resulted in charges. Shares of Agile Property Holdings Ltd., a developer based in Zhongshan, near Shenzhen, rose after its chairman was released from house arrest in December.

Chen, whose $1.3 billion fortune ranked him 226th richest in China, according to the Hurun Report, is also a board member of Hong Kong-listed Sino Oil & Gas Holdings Ltd.

This January, Kingkey denied rumors it had gone bankrupt after a blogger posted a note he later deleted that a Kingkey core family member had been detained, according to a report on People.cn, a website controlled by the Communist Party’s People’s Daily newspaper.

— With assistance by Shai Oster, Steven Yang, and Keith Zhai

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