Survey announced 3 days after announcement of ‘doubling of debt assets’
China has launched an investigation into Zhongzhi Group, a large asset management company with debt of at least 220 billion yuan (about 40 trillion won).
According to the Voice of America on the 27th, the Chaoyang District Branch of the Beijing Metropolitan Police posted a notice on WeChat on the evening of the 25th saying, “We have begun an investigation into Zhongzhi Group affiliates and are taking ‘criminal enforcement measures’ against several suspects, including (official) Xie. “Arrested),” he said.
Zhongzhi Group founder She Zhqun died in December 2021, but several of his relatives are known to be holding high positions in the company and its affiliates.
The ‘Mr. She’ mentioned by the police is expected to be a relative of Shezkun.
However, the police did not reveal specifically what the charges were.
The announcement of the investigation came three days after the company announced excess debt that was more than twice its total assets.
Previously, on the 22nd, Zhongzhi Group said in a notice titled ‘Apology Letter to Investors’, “As a result of a comprehensive asset review through an intermediary, total assets are 200 billion yuan, and the amount of debt principal and interest excluding deposits is 420 billion to 460 billion yuan. “It was confirmed that it amounted to 100 million yuan.”
The group also said, “On December 18, 2021, the company’s internal management became uncontrollable due to the sudden death of Mr. Sezkun, the group’s actual owner, and the departure of high-ranking officials, and a series of measures were taken to resolve management difficulties. “The effect did not meet expectations,” he said.
Based on this announcement, liabilities exceeding assets amount to 220 to 260 billion yuan.
Zhongzhi Group, a representative company of Chinese shadow banking, was founded in 1995 and grew into a conglomerate with assets of 1 trillion yuan, but is experiencing a liquidity crisis amid the real estate recession.
Chinese real estate development companies have been experiencing a liquidity crisis since 2020 due to strengthening regulations by the authorities, and the impact has spread to shadow banking, which served as a source of funds for real estate development.
Zhongzhi Group’s crisis received attention in July when Zhongrong International Trust, an affiliate of Zhongzhi Group, postponed repayment of dozens of maturing products. Then, in August, the group announced that “the company is facing a liquidity crisis and will carry out debt restructuring.”
Shadow banking refers to financial products traded outside the banking supervision system, and because it is in the blind spot of institutions and regulations, it can be operated relatively freely, but the risks are also high.
Meanwhile, the size of China’s shadow banking is estimated to amount to $3 trillion (approximately 3,899 trillion won).
Experts expect regulators to step in to prevent further damage, as the impact of Zhongzi Group’s bankruptcy could spread throughout the financial world, given that it is a major player in shadow banking.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.