The big concern about the failure of Chinese real estate titans Evergrande Group and Country Garden was that their financial collapse would spread into the rest of the economy.
Sure enough last week a major shadow bank called Zhongzhi Enterprise Group sent a letter to investors announcing it was insolvent.
Advertisement China's Zhongzhi Enterprise Group, a leading wealth manager, told investors it is heavily insolvent with up to $64 billion in liabilities, threatening to reignite concerns that the country's property debt crisis is spilling over into the broader financial sector.
The firm, which has sizable exposure to China's real estate sector, apologised to its investors in a letter that said it had total liabilities of about 420 billion yuan to 460 billion yuan "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.
"The Zhongzhi group deeply apologises for the losses caused to investors. We fully understand the urgency, importance and seriousness of resolving this overall risk," the group said in the letter.
Beijing police have begun a probe into the wealth management unit of Zhongzhi Enterprise Group, the authorities said over the weekend.
The founder of the group, Xie Zhikun, died of a heart attack in December 2021, but his nephews hold key posts in the group, according to Chinese state media.
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