Red Star Macalline's Fall from Grace - Founder's Detention Signals New Chapter in China's Real Estate Saga
Red Star Macalline's Fall from Grace: Founder's Detention Signals New Chapter in China's Real Estate Saga
The sprawling headquarters of Red Star Macalline in Shanghai stands as a monument to the ambition of one man: Che Jianxing, the carpenter-turned-billionaire who transformed a small furniture workshop into China's largest home furnishing retail empire. But as of last week, the visionary behind this retail behemoth finds himself detained by authorities, casting a shadow over the future of his business empire.
On May 13, Red Star Macalline announced that its founder and general manager Che Jianxing, 59, had been placed under investigation by the Yunnan Provincial Supervision Commission, which has implemented detention measures against him. The company learned of the detention through Che's family members, having received no formal written notice regarding the investigation.
Summary of Red Star Macalline's Performance in Shanghai and Che Jianxing's Role
| Category | Details |
|---|---|
| Company Origin | Founded in 2007 by Che Jianxing, evolving from earlier ventures started in 1986. |
| Listings | Hong Kong (2015), Shanghai (2018), raising > RMB 3 billion. |
| Peak Revenue | ~RMB 15.5 billion (2021). |
| Recent Revenue | ~RMB 11.5 billion (2023), ~RMB 7.8 billion (2024). |
| Net Income | Profitable in 2022; losses of −CNY 2.22B (2023), −CNY 2.98B (2024). |
| Share Price (Shanghai) | ~CNY 2.91 (May 2025), 52-week range: 2.02–4.45. |
| Share Price (HK) | ~HKD 1.37, 52-week low: ~HKD 1.05. |
| Business Segments | Mall operations, construction & design, product sales, services. |
| Founder | Che Jianxing – former carpenter, led growth into 400+ outlets nationwide. |
| Ownership Changes | Sold control to state-owned Xiamen C&D in 2023; Che stepped down as chairman. |
| Recent Developments | Che detained for investigation (May 2025); company states operations unaffected. |
From Carpenter's Bench to Retail Throne: The Meteoric Rise of an Empire
Che's journey epitomizes the rags-to-riches narrative that defined China's early reform era. Starting as a humble carpenter in the early 1980s, he borrowed money in 1986 to establish his first furniture workshop. By 1991, he had founded the first Red Star Furniture City in Changzhou, pioneering a "front shop, back factory" model that would revolutionize furniture retailing in China.
"The early Red Star model was revolutionary for its time," explains a retail analyst who has followed the company for decades. "Che didn't just sell furniture from his own factory—he created a platform where multiple brands could showcase their products under one roof, giving consumers unprecedented choice."
This vision crystallized in 1994 when he formed "Changzhou Red Star Macalline," establishing the first furniture enterprise group in Jiangsu province. The company's expansion accelerated rapidly, with large stores opening across China and collaborations with international brands like Walmart by 2003.
By 2016, Red Star Macalline had surpassed 200 stores nationwide, overtaking Wanda Plaza to become the world's largest commercial property operator. This explosive growth culminated in Red Star Macalline's dual listings on the Hong Kong stock exchange in 2015 and on mainland China's A-share market in January 2018, when the company's market capitalization briefly exceeded 100 billion yuan.
The House of Cards: Financial Deterioration Behind the Gleaming Façade
However, beneath the impressive expansion lay mounting financial troubles that would eventually come to light. The company's business model had evolved from manufacturing to becoming what industry insiders describe as a "landlord" operation—renting large commercial spaces to furniture vendors and profiting from rental income and management fees.
This model, while lucrative, created friction with vendors through what some describe as onerous payment terms. "Red Star's payment cycles are typically longer than other platforms," reveals a furniture vendor who rents space in multiple Red Star locations. "They calculate the 45-day payment period not from when customers pay, but from when delivery is confirmed—which can silently extend the cycle by weeks."
These practices reportedly allowed Red Star to accumulate substantial cash reserves, which it then deployed into various lending activities—a pattern that has become increasingly common among large Chinese commercial operators seeking additional revenue streams.
The financial consequences of this aggressive expansion strategy and diversification became painfully apparent in recent years:
- In 2023, Red Star Macalline reported staggering losses of 22.16 billion yuan
- 2024 saw further deterioration with operating revenue falling to 78.21 billion yuan (down 32.08% year-on-year) and net losses widening to 29.83 billion yuan
- Over 2023 and 2024 combined, total losses reached nearly 52 billion yuan
- In Q1 2025, self-operated stores generated 12.47 billion yuan in revenue (down 16.4% from the previous year)
These financial challenges coincided with Che's ambitious diversification strategy. Under his leadership, Red Star expanded far beyond furniture retailing, creating three major platforms: Red Star Macalline Home Furnishing Group for retail operations; Chongqing Red Star Macalline Business Development (later renamed after acquisition) for commercial real estate development; and Red Star Holdings, the parent company overseeing a vast portfolio spanning real estate, home furnishings, logistics, and finance.
The White Knight's Entry: Rescue Attempts Amid Mounting Debt
As Red Star's financial situation deteriorated, with total liabilities reaching an alarming 196.6 billion yuan by 2020 and an asset-liability ratio of 73.4%, rescue efforts began taking shape. The company's publicly-listed entity, Red Star Macalline, reported debts of 80.45 billion yuan, with over 60% of its assets mortgaged.
"The level of leverage became unsustainable as the real estate market turned," notes a finance professor at a leading Shanghai university. "What we witnessed was a classic case of overextension just as the market cycle was shifting unfavorably."
In what market observers describe as "huddling for warmth," Sino-Ocean Group stepped in as a white knight in March 2021, initially investing 1.03 billion yuan for an 18% stake in Red Star's real estate development arm. By July of the same year, Sino-Ocean had deployed approximately 4 billion yuan to acquire a 70% stake in Red Star's property development business, whose assets approached 100 billion yuan—representing a valuation of less than 5% of its total assets.
The rescue efforts continued in early 2023 when Jiangfa Holdings acquired a 29.95% stake in Red Star Macalline for approximately 6 billion yuan, becoming the largest shareholder. This transaction pushed Che's Red Star Holdings to second place with a reduced 24.9% stake, forcing him to relinquish his chairman position while initially retaining his roles as director and general manager.
Yunnan Connections: The Geographic Focus of Investigation
The investigation by Yunnan provincial authorities has raised questions about Red Star's operations in the southwestern province. Public records show that Red Star Macalline has two subsidiaries in Yunnan that are joint ventures with state-owned enterprises, both partnering with Yunnan Shunqi Park Management Co., Ltd., which is controlled by the state-owned Yunnan Tourism Holdings Group.
This business structure reflects Red Star's typical expansion model in third and fourth-tier markets, where partnerships with local state-owned enterprises have facilitated market entry and expansion. However, these relationships are now under scrutiny as part of the broader investigation.
Some market analysts note the timing of the investigation coincides with recent disciplinary actions in the region. "Central inspection teams have recently focused on Kunming, where the four most recent top officials have faced investigations," comments an expert in Chinese corporate governance who requested anonymity due to the sensitivity of the topic.
Corporate Resilience: Management Restructuring in the Face of Crisis
In response to Che's detention, Red Star Macalline has announced several management adjustments to maintain operational stability:
- Che's wife, Chen Shuhong, will act as his representative for shareholder duties
- Che Jianfang, a company co-founder, has been appointed acting chairman
- Company president Xu Guofeng will assume responsibility for all business operations
- Board chairman Li Yupeng has temporarily taken over general manager responsibilities
In its official statement, the company emphasized that daily operations remain stable despite the investigation. "The current management team has extensive experience in home furnishing retail operations and has been with the company for many years," notes the statement, attempting to reassure investors and partners.
Broader Industry Context: Real Estate Restructuring Accelerates
Che's investigation comes amid a transformative period for China's real estate sector. Just two days earlier, on May 11, the Chongqing Fifth Intermediate People's Court approved Jinke Holdings' restructuring plan, effectively clearing its 1.47 trillion yuan debt. This landmark case—involving more than 8,400 creditors—represents the largest restructuring in China's real estate industry to date and the first trillion-yuan level listed real estate company to successfully emerge from judicial restructuring.
Under Jinke's restructuring plan, ordinary creditors will receive a recovery rate of approximately 22.36%, significantly better than the 3.02% they would have received in liquidation. This precedent-setting case potentially signals how authorities may approach the resolution of other distressed real estate firms.
The End of an Era: Legacy and Lessons
Che Jianxing's three-decade journey from carpenter to billionaire retail magnate encapsulates both the spectacular rise of entrepreneurial success in reform-era China and the vulnerabilities that can emerge from aggressive expansion and high leverage.
"What we're witnessing is the conclusion of a particular chapter in China's commercial development," reflects an industry veteran who has worked with Red Star. "The model of rapid expansion fueled by debt worked during the growth phase of China's real estate market, but became increasingly unsustainable as the market matured."
As Red Star Macalline navigates this crucial transition period, the investigation of its founder serves as a sobering reminder of the complex interplay between business, finance, and governance in China's evolving market economy—where even the most successful entrepreneurs can find their fortunes dramatically reversed.
For the furniture retail sector and commercial property operators more broadly, the lessons of Red Star's trajectory offer valuable insights into sustainable growth strategies and the importance of adapting business models to changing market conditions—particularly as China's economy continues its transition toward a consumption-driven model less dependent on real estate development.