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Entities linked to Chinese conglomerate Zhongzhi have failed to make payments, multiple investors have said, sparking concern over the country’s wealth management industry and its exposure to a troubled property market.
Beijing-based Zhongzhi, which was founded in 1995, has grown into a sprawling private enterprise with stakes in everything from financial businesses and a “unicorn incubator” to mining groups. Investments are estimated to total at least Rmb1tn ($140bn).
It also holds a “strategic stake” in Zhongrong International Trust, which last week failed to repay the proceeds of two products, according to weekend stock market disclosures.
KBC Corporation, which is part of the semiconductor supply chain, and Nacity Property Service Group said they had not received Rmb60mn and Rmb30mn, respectively.
The disclosures come at a time of widespread speculation across China about the health of the company and its exposure to a property cash crunch that has derailed the real estate sector and dragged on economic growth.
Trust companies such as Zhongrong International Trust have historically been an important source of financing for the property sector, which drives more than a quarter of China’s economic activity but has witnessed dozens of developer defaults.
It is difficult to gauge the group’s total exposure to real estate, but any delays in payments could be seen as a sign of the threat of property and economic woes spreading more broadly.
Country Garden, China’s biggest private homebuilder and formerly seen as one of its safer developers, last week failed to make transfers to international investors on two of its bonds. The group has since said it is “striving to self-rescue”.
An annual disclosure of corporate bonds issued by Evergrande, the world’s most indebted developer, showed Zhongrong last May sued the defaulted property developer over an investment of Rmb1.9bn.
Zhongzhi’s vast scale and multiple subsidiaries, combined with limited and infrequent disclosure, has added to concerns.
In early August, police were called to Zhongzhi’s headquarters in Beijing, where several retail investors sought to “resolve” issues with management, people at the scene said. The investors did not provide further details, while police and security guards declined to say why they were present.
One person, who asked to remain anonymous, said his family had failed to receive payments for a product from Datang Wealth, another business controlled by Zhongzhi, in early July.
Against a backdrop of limited public information, letters purportedly from representatives of investment businesses linked to Zhongzhi have circulated widely on the Chinese internet, apologising for missed payments.
Zhongrong International Trust, the majority of which is owned by Zhongzhi and an affiliated company according to data from corporate information provider Tianyancha, published a statement on its website saying “criminals have forged its corporate seal, official letters and other documents”.
It added that criminals were trying to trick customers into accessing certain websites or joining certain groups on QQ, a social media platform. “The above behaviour has nothing to do with our company,” it said.
Zhongzhi did not immediately respond to a request for comment.
Additional reporting by Wang Xueqiao in Shanghai and Hudson Lockett in Hong Kong
