Shares of China Evergrande Group, already in dire financial straits, experienced a dramatic 25% drop in value when Hong Kong markets opened on Monday. This sharp decline followed the arrest of several employees from the company’s heavily indebted subsidiary, Evergrande Wealth Management, in China.

The stock price of Evergrande sank to HK$0.47 in early morning trading, marking its lowest point in the last two weeks. By 10 am local time, the losses had moderated to 11%, although it still lagged behind the broader Hang Seng Index, which experienced a 0.9% decline. The arrests came to light two days after authorities in Shenzhen, southern China, announced the detention of several Evergrande Wealth Management employees. The authorities did not disclose the number of employees arrested or the charges against them, but they issued a statement urging the public to report any suspected fraud.

Evergrande, recognized as the world’s most indebted property developer with an estimated debt of US$328 billion as of June, has been a central figure in China’s escalating market crisis, stoking concerns about potential global repercussions. Trading in Evergrande’s stock was halted for a prolonged 17-month period, only resuming on August 28. Once a prominent player in an industry crucial to China’s economic growth, Evergrande’s colossal debt is now deemed by Beijing as an unacceptable risk to the nation’s financial stability.

Since 2020, Chinese authorities have progressively restricted developers’ access to credit, resulting in a wave of defaults, most notably that of Evergrande. In recent developments, China’s national financial regulator approved the takeover of Evergrande’s financially troubled insurance subsidiary, Evergrande Life Insurance, by the new state-owned entity, Haigang Life Insurance.