Chinese authorities have opened a probe into Zhongzhi, one of the biggest conglomerates in the country’s sprawling shadow financing market, days after the group declared itself “severely insolvent,” reports the Financial Times. Beijing police said Zhongzhi was suspected of committing “illegal crimes” and that “mandatory criminal measures” have been placed on a number of suspects, including one surnamed Xie, the same as its late founder. The statement did not specify the suspects’ alleged crimes or details of the measures being taken.
Zhongzhi had disclosed in a letter to investors last week seen by the Financial Times that it was facing a shortfall of about $36.4 billion, renewing concerns over China’s opaque $2.9 trillion shadow financing sector and its exposure to the troubled property market and wider economic slowdown.
The company wrote that it had total assets of just RMB 200 billion ($28 billion) against liabilities of up to RMB 460 billion. It added that “internal management ran wild” following the departure of “multiple senior executives and key personnel” in the wake of the 2021 death of founder Xie Zhikun, whom it said had “played a pivotal role in decision-making.”