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🤓🇨🇳📉 You may have read about behemoth Chinese companies succumbing to their massive #debt-loads in the headlines recently, but Zhongzhi is…
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"🤓🇨🇳📉 You may have read about behemoth Chinese companies succumbing to their massive #debt-loads in the headlines recently, but Zhongzhi is different.

Chinese police are investigating a troubled #wealth management unit of Zhongzhi Enterprise Group after the company announced it was 'severely insolvent' in a letter to #investors last week.

The firm said 'it has a "huge debt" and cannot pay all its bills,' which totaled $65 billion against assets valued at less than half that, according to CNN.

'The Beijing-based company is considered part of #China’s $3 trillion '#shadowbanking' industry, a sector that forms an important source of #finance in the country. . . . A major reason behind the company’s financial woes is its strong links with China’s #realestate sector. [A partially-owned international trust], which managed $87 billion worth of funds for corporate clients and wealthy individuals, has invested about a tenth of its #money in real estate,' news staff said.

Zhongzhi - which also catered to the well-heeled and politically-connected - 'is on the brink of becoming one of China’s biggest corporate failures in years,' Wall Street Journal staff said.

'Investors who bought Zhongzhi products have gathered in social-media groups and in person over the past few weeks and tried to figure out ways to pressure the conglomerate to repay them, according to people familiar with the matter. At one recent protest, dozens of people hung banners and shouted slogans such as "Zhongzhi, return us our money!" and "contract fraud!,"' they added.

China has always struggled to rein in shadow-banking operators.

There are many reasons for the industry's tenacious growth, like discriminatory lending practices, regulatory arbitrage, money-laundering, theft and corruption, as well as China's culture of informality in commerce and law.

Suffice it to say, however, that in an opaque system where clarity carries its own risks, shadowy deals and their financial backers - which include many of China’s own banks - tend to mushroom in the dark.

But Zhongzhi’s failure is the strongest evidence yet that the property crisis is spreading to other parts of the #economy - where, like the shadow-banking sector - it's even tougher to address.

Sources linked [below].

😏Happy Tuesday.☕"

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#news #business #geopolitics

[Sources used for the above article:]

"China launches criminal probe into ‘insolvent’ shadow bank"
https://edition.cnn.com/2023/11/27/business/china-police-probe-zhongzhi-insolvent-intl-hnk/index.html

"China Scrambles to Contain a Looming Shadow-Bank Meltdown"
https://www.wsj.com/finance/investing/china-scrambles-to-contain-a-looming-shadow-bank-meltdown-e7af1450

"Shadow banking in China: A Primer"
https://www.brookings.edu/articles/shadow-banking-in-china-a-primer/