BEIJING (BLOOMBERG) - Billionaire Hui Ka Yan has stepped down as chairman of China Evergrande Group's onshore unit as the real estate conglomerate continues to reel from funding troubles.

Mr Hui is no longer chairman of Hengda Real Estate, according to the website of the government-run National Enterprise Credit Information Publicity System. Mr Zhao Changlong was named as the new chairman of the unit, which oversees major property operations.

The move, unveiled on a corporate information platform not typically used for major company announcements, triggered declines in Evergrande shares and bonds. The market reaction underscored how sensitive investors have become to any signs of upheaval at the world's most indebted developer as it attempts to stave off a cash crunch.

The change in chairman of Hengda Real Estate is normal following a decision not to pursue a backdoor listing on China's exchanges, Evergrande said in a response to Bloomberg, adding that there is no change to the management structure and shareholding.

"Whatever the reason, a change of chairman is not a good signal in the eyes of the market," said BG Capital partner Ma Dong. "At a time when Evergrande needs to stabilise market sentiment, Hui's role change will lead to more investor anxiety."

Mr Zhao had served as Hengda's chairman and general manager before August 2017, Evergrande said in the response. The company announced the backdoor listing plan in late 2016 and finished introducing strategic investors in November 2017. Under the plan, scrapped last November, Evergrande would have sold Hengda to a Shenzhen-listed shell company.

Shares of Evergrande fell 4 per cent in Hong Kong trading on Tuesday (Aug 17), taking this year's decline to 64 per cent. The 8.75 per cent note due in 2025 dropped 2.3 US cents on the dollar to 39.5 US cents, on pace for its lowest-ever close.

The government has been pushing to curb Evergrande's borrowing in the hope of putting a stop to the notion that any company can be "too big to fail".

With more than US$300 billion (S$407.6 billion) of liabilities, Evergrande's fate has broader implications for China's US$50 trillion financial system and the nation's banks, trusts and millions of home owners.

Curbed by China's "Three Red Lines" that determine whether companies can take on additional debt, Evergrande has been spinning off and selling assets. It has offered steep discounts and relied on so-called commercial bills as payments for suppliers to cut down on debt.

Evergrande's troubles escalated last year when it faced US$19 billion in payments if it failed to meet a listing promise by the end of January. That sparked concern about cross defaults in its widely held debt securities, triggering fears of systemic risks.

The company skirted the crisis with the help of wealthy friends and the government. Strategic investors agreed to waive their right to force most of the repayments by the property firm, while the local government of Guangdong stepped in to help stabilise the situation, people familiar with the matter said at the time.

More suppliers began to publicise their disputes with the company this year after it failed to make payments.

Some demanded asset freezes. Evergrande's bonds were also repeatedly downgraded by ratings agencies in recent months. A small city government banned it from selling property, alleging that the company failed to set aside enough funds in escrow accounts.

Potential sources of future funding for Evergrande include placements for its listed electric vehicle and property management units, and initial public offerings for operations including its beverage business, FCB, and amusement park and tourism properties, Fitch Ratings has said.

The Shenzhen-based developer has some US$80 billion worth of equity in non-property businesses that could help generate liquidity if sold, Ms Agnes Wong, a Hong Kong-based analyst with BNP Paribas, wrote in a June report.

Analysts have already been on the lookout for possible changes in senior management at Evergrande, with Citigroup credit strategists saying these could indicate that Beijing is taking a tougher stance on the company than in previous liquidity crises.

"Forced asset sales, or forced changes in management, may give some indication that the government will be more forceful in dealing with the company," Citigroup strategists led by Mr Eric Ollom wrote in a note last week.