In a turn of events that could have far-reaching consequences for China’s financial landscape, the Chaoyang Public Security Bureau in Beijing has initiated an investigation into suspected criminal activities involving Zhongzhi Enterprise Group. This development comes on the heels of Zhongzhi’s recent admission of severe insolvency, revealing liabilities of up to $64 billion.
Zhongzhi, a leading player in China’s colossal $3 trillion shadow banking sector, made headlines earlier this week with a disclosure to its investors about its precarious financial situation. The wealth management firm, known for its substantial exposure to the real estate market, has sent shockwaves through the financial community, sparking concerns about the potential spillover of China’s property debt crisis into broader financial realms.
The company issued a letter of apology to its investors on Wednesday, acknowledging total liabilities ranging from approximately 420 billion yuan to 460 billion yuan. These liabilities far surpass the estimated total assets of 200 billion yuan, indicating a significant financial imbalance.
The Beijing authorities, through a social media post, confirmed that the investigation extends to “many” suspects associated with Zhongzhi. Investors are being actively encouraged to cooperate with law enforcement by reporting any losses incurred, thereby contributing to the ongoing investigation.
Notably, the post did not specify the nature of the suspected crimes involving Zhongzhi or the individuals under scrutiny.
By Reuters
