Zhongzhi Collapse Could Be Bigger Than Evergrande's

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“With a net liability of 220 billion to 260 billion yuan, Zhongzhi is severely insolvent and is having a huge operational risk,” a financial anchor said in her vlog posted on social media on Monday.

“The company said it's not easy to liquidate its assets, most of which are bonds and equities that are now undervalued. It seems to be telling the public that its net liability may actually be more than 260 billion yuan.”

She says Zhongzhi's founder and executives built a financial empire by forming partnerships between the firm and SOEs while using the latter's reputation to raise funds over the past two decades. She says Jie's family had accumulated as much as 25 billion yuan of wealth during the peak period.

Zhongzhi Enterprise Group's founder Jie Zhikun died in December 2021. Photo: Baidu

“Zhongzhi said it has lost its direction after the death of Jie in 2021. How could the company blame a dead person after a huge amount of its assets disappeared?” she asked?

“The fall of Zhongzhi may be one of the largest defaults since the establishment of the New China in 1949,” a financial columnist wrote in an article .“The negative impact of Zhongzhi's collapse may be even bigger than that of Evergrande as Zhongzhi has huge assets under management.”

“Many senior executives in Zhongzhi have made their fortune and left the company while the company's wealth management product clients lost their money,” he says.“Who is going to take the responsibility?”

An apology

In June, some clients complained that they could not get their money back when the wealth management products they bought from Zhongzhi and its subsidiaries such as Zhongrong International Trust matured.

On August 11, an unnamed former employee of Zhongrong was quoted by Cailian Press, a financial website, as sayin on August 11 that at least 350 billion yuan of Zhongrong's wealth products that were sold through Zhongzhi's sales channels had stopped payouts.

He said the figure did not include the products directly sold by Zhongrong.

The National Financial Regulatory Administration (NFRA), China's financial regulator, has set up a task forc to examine Zhongzhi, Bloomberg reported.

After a three-month auditing, Zhongzhi told its clients in a letter on November 22 that it wanted to apologize for its ineffective internal operation after Jie's death. It said its management had tried to restructure the business and turn around the unfavorable situation but the moves did not achieve the expected results.