The turmoil at Zhongzhi Enterprise Group Co., a secretive financial conglomerate that manages about 1 trillion yuan , surged to the fore after several of its corporate clients disclosed overdue payments by a trust unit. In a sign that Chinese authorities are worried about potential contagion, the banking regulator has set up a task force to examine risks at Zhongzhi, according to people familiar with the matter.
The confluence of risks is adding pressure on Xi Jinping’s government to shore up investor confidence. Chinese stocks slumped on Monday, with the CSI 300 Index falling for the fifth time in six sessions, while the yuan depreciated toward its weakest level this year. Analysts at JPMorgan Chase & Co. warned that the turmoil at Zhongzhi and Country Garden may create a “vicious cycle” for real estate financing in China.
Beijing-based Zhongzhi was founded in 1995 by Xie Zhikun, who built the firm into a sprawling empire. Xie died of a heart attack in 2021, just as COVID-19 and pandemic lockdowns slowed China’s economy and increased volatility in its capital markets. While his replacement Liu Yang vowed to keep the company’s strategic focus on industrial and asset management businesses unchanged, the economic slowdown and the property-market slump have weighed on its operations.
In one unverified letter being circulated on social media, a wealth manager at Zhongzhi apologized to his clients, saying the group’s wealth arms have decided to delay payments on all products since mid July. The incident involves more than 150,000 investors with outstanding investments totaling 230 billion yuan, according to the letter.
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