“2017 was not the time to take action on Hui, because he was not on the radar from the regulators’ point of view, thus he was able to continue to move forward” with his plans, said Tommy Wu, senior economist with Oxford Economics in Hong Kong. “But now it is the time” to act, seeing how big his business had ballooned, he said.

Hui, also known as Xu Jiayin on the mainland, was born in a village in Gaoxian, a town of fewer than 50,000 residents in central China’s Henan province. Raised by his paternal grandmother, Hui studied metallurgy at what was then the Wuhan Institute of Iron and Steel, before finding work in the local steel mill.

Attracted by the reforms, Hui quit his steel job in Wuhan in 1992 and headed for southern China. He first landed a job in trading, where he rode the wave of China’s growing commerce with the world, and the rising tide of entrepreneurship that was replacing almost every aspect of communal ownership with private holdings.

Four years later, Hui founded Evergrande in Guangzhou, where he went about building high-rise apartments, selling them to buyers in a housing market that was barely 10 years old.

In the late 1990s before China joined the World Trade Organization (WTO), the property industry was dominated by large state-owned developers with the capital and access to the best locations. Apartments were large, and priced beyond the affordability of all but the wealthiest buyers.

Hui focused instead on building affordable homes for the mass market, delving deep into his own memory as a village kid dreaming of city life. He borrowed to build at low costs, selling his apartments off-plan, and using the high turnover to generate cash flow to fund his growth.

“Developers like Evergrande raked in billions relying on the presale scheme and high leverage in the early days of China’s economic reforms, and there’s a historical reason for allowing that,” said Gan Li, a professor at Southwestern University of Finance and Economics. “Now times have changed. What the government needs is not highly leveraged companies or billionaires, but for the sector to return to rational growth.”

By the time Evergrande turned 21 in 2017, it was already the world’s biggest property developer by sales, surpassing its long-time, crosstown rival Vanke. Hui topped the 2017 Forbes China Rich List, with his wealth estimated at US$42.2 billion.

Real estate is one of China’s most tightly regulated industries, overseen by a plethora of regulators from the central bank to the economic planner, over concerns of its impact on the economy and the banking system. Every few years, authorities would step in with a potent mix of monetary policies and administrative rules to deflate any signs of a housing bubble, and to deter speculation.

“That forced Evergrande to boost its capital and cash through price cutting,” said Bondcritic’s managing director Warut Promboon, who has been monitoring the developer’s debts for 10 years in Hong Kong. “The three red lines really tipped the balance.”

This was not Hui’s first brush with a liquidity crunch. When home prices slumped across China’s major cities in 2015, Evergrande received a 100 billion yuan lifeline from Bank of China and the Agricultural Bank of China.

“The situation now is far different from what we expected in June,” said Zhou Chuanyi, a credit analyst at Lucror Analytics in Singapore.

The situation continued to deteriorate on September 11, when protesters crammed Evergrande’s Shenzhen head office demanding refunds of their wealth management products.

“So when it rains, it pours,” said Promboon.

“I do see Evergrande following HNA’s path,” said Promboon. “It will become a smaller Evergrande following the sale of noncore assets to repay debts. However, Evergrande is quintessentially a property company so the break-up will not be so dramatic.”

“Not even close,” said a Barclays report on September 20. The effects could spill over to China’s property sector, with economic implications. But the US$300 billion in liabilities is not large enough to tip the scale of China’s banking system which has as much as US$40 trillion to US$45 trillion in assets, and total loans of over US$30 trillion, Barclays said.

Evergrande’s difficulties are playing out just as China Huarong Asset Management is in the middle of a recapitalisation exercise.

That means two of China’s largest offshore bond issuers are testing the capacity and appetite of the government to backstop potentially substantial failures, S&P Global said.

Although Evergrande’s potential defaults represent a fraction of China’s financial system, the high-profile cases have rattled investors since the common perception has been that the Chinese government will not let state-supported firms fail, analysts said.

Many investors and international banks believe Beijing could soon put forward a plan or make some meaningful progress to reduce the impact. While many questions remain unanswered, one thing is for sure: bondholders are likely to be the last to be refunded, in a long queue behind homebuyers, contractors, banks, and wealth management product investors, analysts said.

“Pricking the bubble created by developers like Evergrande is a very good way to give a lesson to the entire sector and show the determination of the government to stabilise the housing market,” said Gan.