Commentary on Political Economy

Saturday 2 December 2023

HAHAHAHA!

 Top executives of groups tied to ailing Chinese shadow bank Zhongzhi vanish


CHENG LENG — HONG KONG · Dec 2, 2023


Companies linked to troubled shadow banking company Zhongzhi said that they had lost contact with two executives, days after Chinese authorities said they were opening an investigation into the sprawling conglomerate.

Ma Hongying, chair of Shenzhen-listed early-education provider Dalian My Gym Education Technology, and Ma Changshui, chair of Xinjiang Tianshan Animal Husbandry Bio-Engineering, could not be reached, the companies said in separate exchange filings late on Wednesday.

An investment division of Zhongzhi owns a 30 per cent stake in My Gym, while other Zhongzhi groups own a combined 24.3 per cent stake in Tianshan.

In their filings the companies said that they “will pay close attention to the follow-up progress of the matter, and provide information disclosure in a timely manner”.

They added that the two executives did not hold stakes in their respective companies.

Their absence is the latest blow to troubled conglomerate Zhongzhi, which is at the heart of the country’s $3tn shadow banking market and has over decades built up a complicated web of investments in listed companies and the property market.

Zhongzhi has warned that it faces a $36bn shortfall and in an open letter to investors admitted that it was “severely insolvent” and that management “ran wild” after the death of founder Xie Zhikun.

Over the weekend, the Beijing police opened a probe into Zhongzhi’s wealth management units, accusing them of committing “crimes” and saying “mandatory criminal measures” had been placed on a number of suspects, including one surnamed Xie.

In the filings Tianshan and My Gym said that they had spoken to the two executives’ family members and did not know any specific reason why they would have gone missing.

My Gym and Tianshan did not immediately respond to requests for comment.

Founded in 1995, Zhongzhi expanded from timber processing to property and finance.

The company held a nearly 33 per cent stake in Zhongrong International Trust, a shadow banking financier, as of the end of 2022.

Zhongrong’s exposure to the property sector accounts for about 18 per cent of its total portfolio at the end of 2020, up from 6.6 per cent in 2017, according to its financial statements.

Zhongrong stopped making payments on some of its investment products this year, prompting complaints to the regulators.

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