China trust firm Zhongrong exposed to struggling property developers: Report

Troubled Chinese trust firm Zhongrong has lent money to several of the country’s struggling property developers, the Financial Times reported on Sunday (Sep 17) citing its analysis of legal and company filings.

Zhongrong International Trust is a giant of China’s US$3 trillion shadow finance industry and has recently missed payments of some trust products on time.

The Financial Times (FT) report said links between Zhongrong and property developers have fuelled fears of spillover effects from a slowdown in the real estate sector.

Legal filings from 2022 and 2023 examined by the FT show Zhongrong has pursued more than 8.7 billion yuan (US$1.20 billion) in claims against Sunac, which defaulted in 2022 and reached an offshore debt restructuring plan in March. It is unclear what, if any, settlement Zhongrong reached with Sunac, the report said.

Zhongrong did not respond to a request for comment on the report.

Zhongrong delayed payments on two products due in March 2021 and April 2022, according to a disclosure in April from textile chemicals company Zhejiang Jihua, the report said, adding that, Chinese state media reports linked the products to real estate projects developed by China Fortune Land Development and Sunac, respectively.

Zhongrong Trust’s real estate investment exposure accounted for 10.7 per cent of its total assets under management as of the end of 2022, higher than the industry average of 5.8 per cent, according to a report from Citigroup.

Zhongrong said on Friday that it was unable to make payments on some trust products on time. The company has already missed payments on dozens of investment products since the end of July, according to investor sources.