Zhongzhi Enterprise, a major Chinese wealth management group, has announced insolvency, with liabilities estimated between USD58bn to USD64bn, heightening fears of the property debt crisis affecting the broader financial sector. The Beijing-based group’s assets, mainly in long-term debts and equity, are around half of its liabilities, complicating liquidation efforts. This crisis in the shadow banking sector, a significant part of China’s economy, could potentially trigger wider financial instability, though regulatory intervention is expected. The company’s troubles began with missed payments by its subsidiary, Zhongrong International Trust Co. As China’s property sector faces a liquidity crunch, the situation at Zhongzhi underscores the challenges in the financial landscape, with minimal chances of full repayment for investors.
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