(Beijing) Police in China have opened an investigation into the private conglomerate Zhongzhi, a debt-ridden financial giant declared “insolvent” and whose setbacks raise the risk of contagion.
Zhongzhi (ZEG), little known to the general public but which has a galaxy of financial companies, is one of the most important players in the market.
It alone manages more than 1 trillion yuan ($192 billion Canadian) in assets, according to estimates from investment bank Nomura.
A large number of companies and wealthy individuals have entrusted him with their savings.
During the boom years, many developers used trust or asset management companies like Zhongzhi to finance their projects.
But the group, caught up in the real estate crisis in China and a slowdown in the economy, is now unable to reimburse beneficiaries.
Zhongzhi, which declared itself “insolvent” on Wednesday, valued its arrears at nearly C$90 billion, according to a letter to investors reported by local media.
Police in Beijing, where the group is based, said Saturday evening they had opened an investigation into unspecified “alleged offenses.”
“Coercive measures” were taken against “several suspects”, adds a press release which does not specify their number or what these measures consist of.
In September, the authorities had already used this term to describe the situation of the boss of the real estate giant Evergrande, with colossal debt, placed under house arrest, according to press information.
Zhongzhi notably owns the subsidiary Zhongrong International Trust (ZTR), where worried savers tried in vain in August to demand accountability.
Its bankruptcy raises fears of immeasurable consequences for the financial system in China, two years after the descent into hell of Evergrande, whose setbacks continue to weigh on the real estate sector and the economy.
Already weakened by this crisis, Zhongzhi has been further weakened since the death in 2021 of its founder Xie Zhikun.
