A debt and property crisis is brewing in China, the world’s second-largest economy.
Angry investors in China protested outside a shadow bank after it missed payments on investment products.
A day later, Bloomberg reported the shadow banking giant behind Zhongrong is planning to restructure its debt.
The protests were a rare show of public anger in China amid concerns over the country’s economy.
Angry investors in China protested outside a shadow bank on Wednesday, after it missed payments on dozens of investment products. This rare show of public anger points to serious trouble amid debt and housing distress in the world’s second-largest economy.
A day later, Bloomberg reported that Zhongzhi Enterprise — the shadow banking giant behind Zhongrong — is planning to restructure its debt and has hired KPMG to audit its balance sheet, citing unnamed people familiar with the matter.
The protest took place outside the offices of Zhongrong International Trust in Beijing with about two dozen protesters demanding payment on their investment products, Bloomberg reported Wednesday.
A separate video posted on the video-sharing platform Bilibili also appeared to show an irate group of investors confronting a Zhongrong International Trust staff and angrily demanding answers.
“The financial statements said there is a profit, and it has matured,” a woman shouted angrily in the video, per an Insider translation. “So why aren’t you honoring your payments to us?” In response, the company employee appeared to urge patience and calm, but the crowd continued to demand answers.
There were about ten police and security officers during the time of the incident, according to Bloomberg.
While there weren’t any protesters at Zhongrong’s office when a Bloomberg reporter visited on Wednesday afternoon, there was an “unusually heavy police presence” about the building, the media outlet reported.
The protest in Beijing came after Zhongrong International missed payments on dozens of investment products since late July.
Zhongrong is the ninth largest trust in China, with 600 billion Chinese yuan, or $82 billion, worth of assets under management. It has 270 high-yield products totaling 39.5 billion yuan that are due this year, per Chinese data provider Use Trust, various media outlets reported.
China’s trust sector itself is worth a whopping $3 trillion — at the end of 2022, the trust sector’s exposure to real estate was about 2.2 trillion yuan, or $302 billion, accounting for 10% of its total assets, per Bloomberg Economics.
These troubles at Zhongrong came to light just days after Country Garden, China’s biggest private-sector developer by sales, missed interest payments on two US-dollar-denominated bonds.
Both events are highly worrisome, because China’s trust companies sell investment or trust products to corporate and wealthy clients. The clients’ funds are then pooled and invested in a wide range of products or used as loans to private companies — including real-estate developers.
Zhongrong, Zhongzhi, and KPMG did not immediately respond to requests from Insider for comment.