Chinese Asset Manager Sparks Debt Overhaul Fears

Chinese Asset Manager’s Debt Restructuring Sparks Fears of Financial Sector Contagion

Zhongzhi Enterprise Group, one of China’s major asset managers, has informed investors of the need for a debt restructuring, raising concerns of a potential contagion in the country’s financial sector. The Beijing-based firm, which manages $137 billion in assets, has already ceased payment to investors in all investment products. Zhongzhi operates in China’s shadow finance sector, selling high-yielding investment products and has significant exposure to the struggling real estate sector. This news has led to anxious retail investors bombarding listed companies with inquiries regarding their exposure to Zhongrong, a subsidiary of Zhongzhi. Citigroup expects more trust-fund defaults due to their exposure to the property sector downturn in China but does not foresee a “Lehman moment” as investors are said to have already prepared for potential defaults.