Raising concerns about the financial crisis caused by the slowdown in China’s real estate market, Chinese investment firm Zhongrong Trust, which manages a US$87 billion fund for corporate clients and wealthy individuals by the end of 2022, has announced interest had failed to make payments and principal on several investment products, CNN reported.

According to his statements, the scale of the payments exceeded 110 million yuan ($15 million).

Zhongrong Trust, another major Chinese investment firm, has delayed payments to corporate investors, triggering a rare protest in Beijing, CNN reports.

At least three Chinese companies – Nacity Property Service, KBC Corporation and Jianheng International Science & Technology – said in separate stock exchange filings in recent weeks that Zhongrong Trust was facing difficulties in meeting its corporate investor obligations. Is kept.

They are considered part of the “shadow banking” industry, a sector that forms an important source of finance in China. The term usually refers to financing activity that occurs outside the formal banking system, either by banks through off-balance-sheet activities, or by non-bank financial institutions, such as trust firms.

A mysterious and vast part of China’s financial landscape, the “shadow banking” sector has come under the spotlight as global investors worry about the future of the world’s second-largest economy, according to CNN.

In addition, concerns about Zhongrong have grown since social media videos surfaced this week showing protests outside his office in Beijing.

About a dozen angry protesters were recorded chanting slogans and demanding payments related to investment products released by the company, according to videos posted on the social media apps Douyin and WeChat, reports CNN. The videos appear to have been uploaded on Wednesdays and Thursdays.

However, the company has not responded to CNN’s request for comment.

On Monday, Zhongrong issued a statement saying “criminals” had sent false notices to customers about the cancellation of investment products. It has warned investors to beware of frauds, but has not commented on the issue of missed payments to investors.

Zhongrong is affiliated with the Zhongzhi Group, one of China’s largest private conglomerates with operations in financial services, mining and electric vehicles. The group’s main financial units have more than one trillion yuan (US$138 billion) in funds under management, according to a statement posted on its website in December.

As CNN reports, news of Zhongrong’s missed payment triggered panic reactions on social media, as it further fueled online speculation earlier this year that Zhongzhi Group faced a liquidity crunch and It stopped repayments on some of its investment products.

In recent days, investors have asked several listed companies on online forums organized by the Shanghai and Shenzhen stock exchanges whether they have any investment in Zhongrong’s products.

CNN, citing a research report by Citi analysts, reported that investors feared an “infection” spreading to the country’s US$2.9 trillion investment trust industry. Notably, this has happened because the industry has long been exposed to China’s troubled real estate sector, which is currently mired in its worst recession ever.

But “systemic risks” were limited, analysts said, and a potential confidence lapse was unlikely to lead to China’s “Lehman moment”, a reference to the bank’s collapse in 2008, which marked a major turn of the global financial crisis. , CNN reported.

According to the China Trustee Association, the total exposure of all trust funds to the property sector was estimated at 1.13 trillion yuan (US$154 billion) by the end of March, which is about 5 percent of the total value of trust funds. Country.

CNN quoted Nomura analysts in a research report as saying, “It is fair to say that given the latest developments concerning Zhongzhi, its subsidiaries and other wealth management firms, this 1.13 trillion yuan-worth of funds… Is in danger.”

“Further headwinds are likely to arise due to the upheaval [economic] development,” he added.

(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content was auto-generated from a syndicated feed.)


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