China wealth manager Zhongzhi flags insolvency with up to $64 billion in liabilities

BEIJING : China’s Zhongzhi Enterprise Group told investors it has up to $64 billion in liabilities and is heavily insolvent, as one of the leading wealth managers in the country grapples with a deepening property sector crisis.

The firm, which has sizable exposure to the country’s real estate sector, apologised to its investors in a letter which said it had total liabilities of about 420 billion yuan ($58 billion) to 460 billion yuan ($64 billion).

The liabilities compared to Zhongzhi’s estimated total assets of about 200 billion yuan, the letter, which was seen by Reuters, showed.

“Initial inspections show that the group is seriously insolvent and has significant continuing operational risks. The resources available for debt repayment in the short term are much lower than the group’s overall debt scale,” it said.

Zhongzhi did not immediately respond a Reuters’ request for comment.

The liquidity stress facing Zhongzhi, which has sprawling businesses ranging from mining to wealth management, highlights the ripple effect of China’s property sector debt woes to the broader economy.

China’s highly indebted property sector has been reeling from a liquidity crunch since 2020. Defaults by developers since late 2021 have impeded economic growth, rattled global markets and threatened a wider financial crisis.

Signs of trouble at the group first came to light in July when Zhongrong International Trust Co, a leading trust company controlled by Zhongzhi, missed payments on dozens of investment products.

($1 = 7.2111 Chinese yuan renminbi)