Chinas Lehman moment? Big investment firm misses payments
- According to the China Trustee Association, the total exposure of all trust funds to the property sector was estimated at 1.13 trillion yuan ($154 billion) by the end of March, accounting for about 5% of the total value of trust funds in the country.
- A major Chinese investment trust has missed payments to corporate investors, sparking a rare protest and adding to concerns that a slump in China’s property market could trigger a wider financial crisis.
- As investors in these wealth management products tend to overwhelmingly be middle and upper-middle class people, any defaults or even concerns caused by delayed payments could further dampen consumer confidence, they said.
- At least three Chinese companies — Nacity Property Service, KBC Corporation and Xianheng International Science and Technology — said in separate stock exchange filings in recent weeks that Zhongrong Trust had failed to pay the interest and principal on several investment products.
- Zhongrong Trust, which managed $87 billion worth of funds for corporate clients and wealthy individuals as of the end of 2022, is one of thousands of wealth management firms in China that offer relatively high levels of return to investors.
- “It is fair to say that given the latest developments related to Zhongzhi, its subsidiaries, and other wealth management firms, this 1.13 trillion yuan worth of funds … is now under great threat,” Nomura analysts said in a Monday research report.
A major Chinese investment trust has missed payments to corporate investors, sparking a rare protest and adding to concerns that a slump in Chinas property market could trigger a wider financial cris [+7279 chars]