Two clients of Chinese trust company Zhongrong International Trust Co (中融國際信託) said the firm delayed payment of maturing wealth products amid reports of liquidity concerns at a major shareholder, the latest sign of turmoil in China’s financial sector.
Nacity Property Service Co (南都物業) and KBC Corp (金博碳素) first announced news of the delayed payments in statements on Friday evening.
KBC, a carbon products manufacturer, said in a statement with the Shanghai Stock Exchange that the delayed payments were tied to 60 million yuan (US$8.3 million) invested with Zhongrong and would not affect company operations.
Photo: Bloomberg
Chinese asset management firm Zhongzhi Enterprise Group Co (中植企業) — a financial giant in China whose business cuts across trusts companies, private equity and wealth management — has an ownership stake in Zhongrong.
Late last week, there was speculation that the delayed payments were related to a liquidity crisis at Zhongzhi, which has about 1 trillion (US$138.19 billion) yuan in assets under management, according to Caixin.
Representatives for Zhongrong could not be reached for comment yesterday outside of business hours.
The news of Zhongrong’s delayed payout comes as investors have been on edge recently over concerns of the health of China’s economy and financial markets.
The trust industry has also been pressured by the crisis in China’s property sector in recent years, with companies defaulting on investment products linked to property developers in the past.
Firms including Zhongrong and MinMetals Trust Co (五礦信託) bought stakes in at least 10 real-estate projects last year, betting that unfinished homes will eventually yield cash to pay off some of the US$230 billion in property-backed funds they have issued to investors.
One of China’s largest developers, Country Garden Holdings Co (碧桂園), unsettled markets last week amid fears of a default as it reported steep losses in the first half of the year.
The company said in filings to the Shenzhen Stock Exchange on Saturday night that it would suspend trading in nearly a dozen onshore bonds starting today, adding to concerns about the potential drag the industry will have on growth in the world’s second-largest economy.
China’s trust industry combines characteristics of commercial and investment banking, private equity and wealth management. Firms in the sector pool household savings to offer loans and invest in real estate, stocks, bonds, commodities, and even bottles of sorghum liquor. No other firms in the financial industry operate across all these asset classes.
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