陷入困境的中國影子銀行中植申請破產

Recently Yahoo News on-line reported the following:

Troubled China Shadow Bank Zhongzhi Files for Bankruptcy

Bloomberg News

Fri, January 5, 2024 at 5:50 a.m. PST

(Bloomberg) -- Chinese shadow banking giant Zhongzhi Enterprise Group Co. filed for bankruptcy, cementing the rapid downfall of a firm that oversaw more than $140 billion at its peak before succumbing to the property crisis that has wreaked havoc on the world’s second-largest economy.

Zhongzhi said it “obviously” lacked the ability to repay its debts, according to a statement Friday from Beijing’s First Intermediate People’s Court, which accepted the case. An audit found Zhongzhi’s debts were as much as 460 billion yuan ($64.3 billion), compared with assets of 200 billion yuan, according to a letter to investors in November.

The downfall marks one of China’s biggest-ever bankruptcies, putting more stress on already fragile consumer and investor sentiment. The property slump, weak domestic demand and sluggish trade are all weighing on the economy, while its benchmark stock index has plunged three years in a row.

The Zhongzhi filing came just months after the lending giant first triggered concerns in the financial markets when one of its trust-company affiliates failed to repay customers on high-yield investment products, sparking protests in Beijing.

Chinese authorities in November said they opened criminal investigations into the money management business days after the firm revealed a shortfall of $36.4 billion, telling investors it was “severely insolvent.” The company didn’t respond to an email request seeking comment outside of business hours Friday.

While the firm’s creditors are mostly wealthy individuals rather than financial institutions — limiting the direct impact on the financial system — the collapse exposes potential cracks in the $2.9 trillion trust sector. The failure also highlights the risks of the rapidly growing global private credit market, where the lack of public disclosure on debts raised outside the banking system is one of its defining traits.

In recent years, even as rival trusts pared risks, Zhongzhi and its affiliates, especially Zhongrong International Trust Co., extended financing to troubled developers and snapped up assets from companies including China Evergrande Group. China’s housing market continues to flounder despite a slew of incentives from Beijing to revive sales, which have have now dropped in 20 of the last 24 months.

“The persistent decline in the real estate market, coupled with stringent policies and increased financial anti-corruption measures, has hindered timely asset collection,” said Zhao Jian, head of the Atlantis Financial Research Institute in Beijing, who estimates more than half of the group’s assets are linked to real estate. “Redeeming these assets has become exceedingly challenging.”

The filing also underscores Beijing’s unwillingness to bail out struggling financial firms. China Evergrande is among several high-profile developers that have defaulted in recent years amid the real estate crisis, with little direct support from the Communist Party government.

As recently as August, China had asked two of the nation’s biggest financial firms to examine the books of Zhongrong International, potentially paving the way for a state-led rescue of the troubled shadow lender, people familiar with the matter said at the time.

A twice-a-decade financial policy meeting attended by President Xi Jinping at the end of October stressed the need to effectively prevent financial risks and crack down on any illegal financial activities. In a following study session, the banking regulator, which also oversees trust firms, vowed to use “strong medicine” to tackle major risks.

Zhongzhi’s filing is unusual in that China’s highest-profile debt failures in recent years have tended to go through debt restructurings first, avoiding formal bankruptcy. HNA Group Co., the conglomerate that collapsed with billions of dollars of debt, completed its restructuring work in 2022. China Evergrande, whose default in 2021 accelerated the country’s property crisis and which has some $327 billion of liabilities, is still struggling to avoid liquidation and hasn’t filed for bankruptcy.

“Authorities have accumulated quite some experience from handling earlier cases such as HNA Group and Anbang Insurance, so they’re well prepared for risk events like Zhongzhi and more confident they can keep it under control and avoid wider fallout,” said Shen Meng, director of Beijing-based investment bank Chanson & Co.

Shadow banks like Zhongzhi are loosely regulated firms that pool household savings to offer loans and invest in real estate, stocks, bonds and commodities. China’s trust industry is a key alternative funding source for weaker borrowers unable to get regular bank loans such as developers and local government financing vehicles. China has been cracking down on shadow banking since late 2017.

Founded in 1995, Beijing-based Zhongzhi expanded into a sprawling empire that had more than 1 trillion yuan in assets at its peak. The group holds shares in six licensed financial institutions including Zhongrong International, five asset managers as well as four wealth management firms, according to its website. It also has controlling stakes in a string of listed firms across sectors from semiconductors to health and consumption.

The firm said in November that the death of its founder Xie Zhikun in 2021 and the subsequent departure of senior executives had led to a failure of internal management. Previous efforts at a “self-rescue” didn’t live up to expectations, Zhongzhi said in the letter. At the time, lawyers and analysts estimated more than three quarters of investor cash would be lost, with just 100 billion yuan recovered from debt of as much as 460 billion yuan.

 --With assistance from Zheng Li and Amanda Wang.

Translation

（彭博）—中國影子銀行巨頭中植企業集團有限公司申請破產，對全球第二大經濟體來說, 這家在巔峰時期管理著超過1,400 億美元資產的公司迅速垮台，及隨後又陷入了房地產危機, 造成嚴重破壞。

根據受理此案的北京市第一中級人民法院週五的一份聲明，中植表示其銀行「明顯」缺乏償還債務的能力。 根據 11 月給投資者的一封信，審計發現中植的債務高達 4,600 億元人民幣（合 643 億美元），而資產為 2,000 億元。

這次破產標誌著中國有史以來最大規模的破產案之一，給本已脆弱的消費者和投資者情緒帶來了更大的壓力。房地產低迷、內需疲軟和貿易低迷都對經濟構成壓力，基準股票指數已連續三年暴跌。

就在中植提交文件的幾個月前，這家貸款巨頭首次引發金融市場擔憂，當時其一附屬家信託公司未能償還高收益投資產品的客戶，在北京引發了抗議。

中國當局在11 月表示，在該公司披露資金缺口 364 億美元, 並向投資者透露該公司「嚴重資不抵債」的幾天后，當局它進行資金管理業務展開刑事調查。週五該公司沒有回覆工作時間外尋求評論的電子郵件請求。

雖然該公司的債權人大多是富有的個人而不是金融機構 - 減低了對金融體系的直接影響 - 但這次倒閉暴露了價值 2.9 兆美元的信託部門的潛在裂縫。 這次失敗也凸顯了快速成長的全球私人信貸市場的風險，缺乏公開揭露銀行體系之外的籌集債務, 是其顯著特徵之一。

近年來，儘管競爭對手信託公司紛紛去降低風險，中植及其附屬公司，尤其是中融國際信託公司，仍向陷入困境的開發商提供融資，並搶購了中國恆大集團等公司的資產。 儘管北京採取了一系列刺激措施來重振銷售，但中國的房地產市場仍然陷入困境，在過去 24 個月中有 20 個月銷售量下降。

北京 Atlantis Financial Research Institute 院長 Zhao Jian 表示，「房地產市場的持續下滑，加上嚴格的政策和金融反腐敗措施的加強，阻礙了及時的資產回收」。他估計，集團一半以上的的資產與房地產掛鉤。 “贖回這些資產變得極具挑戰性。”

文件也凸顯北京方面不願救助陷入困境的金融公司。 中國恆大是近年來在房地產危機中違約的幾家知名開發商之一，幾乎沒有共產黨政府的直接支援。

知情人士當時表示，就在今年 8 月，中國已要求國內最大的兩家金融公司檢查中融國際的帳簿，這可能為國家牽頭救助這家陷入困境的影子銀行鋪平道路。

10月底，習近平主席出席十年兩次的金融政策會議，強調要有效防範金融風險，嚴厲打擊非法金融活動。 在隨後的研究會議上，負責監管信託公司的銀行業監管機構誓言要使用「猛藥」來應對重大風險。

中植的申請不同尋常，因為近年來中國最引人注目的債務失敗往往首先進行債務重組，以避免正式破產。 背負數十億美元債務倒閉的海航集團於 2022 年完成了重組工作。中國恆大的2021 年的違約加速了中國房地產危機，負債約 3,270 億美元的中國恆大仍在努力避免清算。並且尚未申請破產。

總部位於北京的投資銀行 Chanson & Co. 的公司董事 Shen Meng 表示「相關部門在處理海航集團和安邦保險等早期案件中積累了相當多的經驗，因此他們為中植這樣的風險事件已做好了充分準備，並且更有信心能夠控制事態並避免更大範圍的影響」。

像中植這樣的影子銀行是受鬆散監管的公司，它們匯集家庭儲蓄來提供貸款並投資於房地產、股票、債券和大宗商品。 對於開發商和地方政府融資平台等無法獲得常規銀行貸款的實力較弱的借款人來說，中國的信託業是一個重要的替代融資來源。 自2017年底以來，中國一直在打擊影子銀行。

中植成立於 1995 年，總部位於北京，現已發展成為一個龐大的帝國，在最高峰時擁有資產規模超過1兆元。 據其網站顯示，該集團持有中融國際等六家持牌金融機構、五家資產管理公司以及四家財富管理公司的股份。 它還擁有從半導體到健康和消費等領域的一系列上市公司的控股權。

該公司11月表示，創辦人謝志坤於2021年去世以及隨後的高層離職，導致內部管理失敗。 中植在一封信中表示，先前的「自救」努力並未達到預期。 當時，律師和分析師估計投資者將損失四分之三以上的現金，而高達4,600億元的債務中僅能收回1,000億元。

So, some experts believe that China have accumulated quite some experience from handling earlier cases such as HNA Group and Anbang Insurance, so they’re well prepared for risk events like Zhongzhi, and are more confident that they can keep  Zhongzhi’s bankruptcy under control and avoid wider fallout. While this incident may post a challenge for the communist leaders, I am wondering whether this is a good opportunity for the CCP to slash some wealth held by the rich so as to achieve a better balance between the wealthy and the poor. Equal wealth is one of the features in a communist society.