In Beijing’s central business district, a trust linked to one of China’s wealth management giants is facing a crisis. Multiple clients at Zhongrong International Trust have reported delayed payments, raising concerns about the impact of the country’s struggling property market on the financial industry’s liquidity. This comes as KBC Corporation and Nacity Property Service disclosed missing payments of millions of yuan on trust products from Zhongrong, and Xianheng International reported missed payments of over 2 million yuan.
Zhongrong is partially owned by Zhongzhi Enterprise Group, an asset management conglomerate with stakes across China’s financial sector. The National Financial Regulatory Administration has established a task force to investigate the risks of Zhongzhi’s financial situation, as the company controls about 1 trillion yuan in assets. The troubles at Zhongrong may be linked to China’s real estate crisis, which has been deepening and sparking fears of contagion. New home prices in China dropped in July for the first time this year, and real estate giant Country Garden recently missed bond payments worth $22.5 million. The exposure of Zhongrong to the real estate market, which makes up a significant portion of China’s GDP, further adds to the concerns.
China’s Wealth Management Giant Faces Payment Delays, Adding to Economic Worries
Multiple clients at Zhongrong International Trust, a trust linked to one of China’s wealth management giants, have reported delays in payments, raising concerns about the impact of the country’s struggling property market on the financial industry’s liquidity. Zhongrong, partially owned by Zhongzhi Enterprise Group, disclosed a missing payment of 60 million yuan ($8.22 million) on trust products, while Nacity Property Service reported an overdue payment of 30 million yuan ($4.11 million). Xianheng International was the first to report missed payments amounting to 2.57 million yuan ($352,000). The National Financial Regulatory Administration has launched an investigation into Zhongzhi’s financial situation.
Zhongrong’s troubles may be connected to China’s real estate crisis, which has been worsening since 2020. In July, new home prices in China dropped for the first time this year, adding to the country’s economic woes. Real estate giant Country Garden, which has been on the verge of default, recently missed two bond payments worth $22.5 million. Failure to make the repayment within the 30-day grace period could lead to a wave of defaults in the industry. Zhongrong has a significant exposure to the real estate market, with 11% of its managed assets in the sector. The firm invested in at least 10 real estate projects last year.
The economic troubles in China could potentially lead to social unrest, as seen in the past when financial scandals hit the country. A video showed a couple dozen protesters outside Zhongrong’s Beijing office demanding their payments, highlighting public discontent. However, when a Bloomberg reporter visited the office recently, there were no more demonstrators, but a higher police presence was noted.
China’s economy and financial sector continue to face challenges, particularly in the real estate market. The impact of the property market on the wealth management industry, as seen with Zhongrong’s payment delays, raises concerns about liquidity and stability in China’s financial system.
Takeaways:
- China’s wealth management giant, Zhongrong International Trust, is facing payment delays, indicating potential trouble in the country’s economy.
- The delays are believed to be linked to China’s struggling property market, which has been worsening since 2020.
- Zhongrong has a significant exposure to the real estate market, with 11% of its managed assets in the sector.
- The economic troubles in China could lead to social unrest, as seen in the past when financial scandals hit the country.
- The situation highlights the challenges and potential risks faced by China’s financial sector, particularly in the real estate industry.
