2023-08-14 16:15:55
View over Shenzhen
According to the latest reports, the Chinese stock markets have come under pressure.
(Foto: E+/Getty Images)
Frankfurt China’s capital market is threatened with further turbulence: one of the largest private asset managers in the People’s Republic can apparently no longer meet part of its payment obligations. That sparks renewed concerns about the extent of problems in the country’s shadow banking sector, which in turn could spill over into an already weakened real estate market.
According to media reports, the wealth manager Zhongzhi Enterprise failed to make several payments for investment products that the company sold to very wealthy clients and companies at the end of last week. The company manages the equivalent of around 138 billion dollars.
The uncertainty surrounding Zhongzhi, together with the ongoing turbulence on the real estate market, also weighed on the stock markets of the People’s Republic. The CSI 300 Index fell 0.7 percent on Monday, while the Hang Seng China Enterprises Index slipped 1.6 percent. Losses were significantly higher at times before reports that China’s banking regulators would set up a task force to address Zhongzhi’s problems reassured investors.
On the foreign exchange market, the Chinese currency yuan fell to its lowest level since last November.
The non-payments are fueling concerns about the state of China’s $2.9 trillion trust industry. Companies in the sector raise funds from retail investors to lend to companies and invest in real estate, stocks, bonds and commodities.
>> Read here: The next Chinese real estate group is in trouble
China’s top auditor has launched a review of the entire trust industry, according to a report by Bloomberg news agency. According to the report, the National Audit Office has been examining the books of at least 20 trust companies for about a month to assess their risks to financial stability. It is mainly about risky loans to real estate developers.
The real estate crisis is coming to a head
In the past few days, the crisis of the real estate developer Country Garden in China had come to a head, which is experiencing payment difficulties and has suspended trading in some of its bonds. The company stands for the entire crisis in the Chinese real estate market, whose boom over many years has ensured brisk demand from numerous companies in the construction, metal and chemical industries. That has now reversed.
Country Garden, which specializes in real estate in smaller cities, had debts equivalent to 194 billion dollars at the end of last year and last Thursday announced a loss of up to 55 billion yuan (equivalent to 7.6 billion dollars) for the first half of the year.
In a mandatory announcement, the group apologized for not recognizing the extent of the crisis early on and not taking countermeasures earlier. The real estate company’s shares lost another 25 percent on Monday. In the past week, the losses on the stock exchange added up to around 40 percent.
Analysts at major US bank JP Morgan fear Zhongzhi’s problems could trigger a “downward spiral”. The liquidity stress for indebted real estate developers like Country Garden and their creditors from the shadow banking sector like Zhongzhi is intensifying, quoted the Bloomberg news agency from a recent study by JP Morgan.
The experts see a growing risk of default for the equivalent of almost 390 billion dollars, which corresponds to around 13 percent of the entire Chinese trust industry.
More: Three bankruptcies in one week fuel fear of bankruptcies
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