17th September 2023 – (Beijing) The Financial Times has revealed that Zhongrong International Trust, a major player in China’s shadow finance industry, has extended loans to a number of distressed property developers. The company, which has recently experienced payment delays on certain trust products, has raised fears of potential ripple effects stemming from the slowdown in the real estate sector.
Legal and company filings from 2022 and 2023, analyzed by the Financial Times, indicate that Zhongrong has sought claims totalling over 8.7 billion yuan (approximately US$1.20 billion) against Sunac, a developer that defaulted in 2022 and underwent an offshore debt restructuring plan in March. The outcome of any settlement between Zhongrong and Sunac remains unclear.
Despite requests for comment on the report, Zhongrong has not provided a response. The company has also faced payment delays on two products due in March 2021 and April 2022, as disclosed by Zhejiang Jihua, a textile chemicals company. Chinese state media reports have linked these products to real estate projects developed by China Fortune Land Development and Sunac.
Citigroup’s report indicates that Zhongrong Trust’s exposure to real estate investments accounted for 10.7% of its total assets under management by the end of 2022, surpassing the industry average of 5.8%.
On Friday, Zhongrong admitted its inability to make timely payments on certain trust products, adding to the growing number of missed payments on various investment products since late July, according to sources familiar with the matter.