Chinese Wealth Giant Crumbles: ZEG's Insolvency Shakes Shadow Banking
BREAKING
A leading Chinese wealth management company, Zhongzhi Enterprise Group (ZEG), has declared itself "severely insolvent," sending shockwaves through the country's financial sector and raising concerns about the stability of the $3 trillion shadow banking industry.
The Ripple Effect of Real Estate Slump
ZEG's announcement comes amidst China's ongoing real estate crisis, signaling potential spillover effects into the broader financial market. The Beijing-based conglomerate, with significant investments in the property sector, disclosed in a letter to investors that its total liabilities could reach 460 billion yuan (about $65 billion), starkly outweighing its assets valued at 200 billion yuan.
According to reports by lanjinger.com, a Chinese state-owned news outlet, and international agencies such as Reuters, ZEG's financial distress highlights the challenges facing China's shadow banking system. However, the contents of the letter and the full extent of ZEG's financial woes remain unverified, as the company has not responded to requests for comment.
So what happens to all the little people with mortgages greater than their home value? In the 80’s, the mortgage company I worked for foreclosed on everything. I thought it was a property grab. I was a 17-year-old kid and didn’t pay attention.
China has over 20 million undelivered units either unfinished or of tofu dreg construction that need remediation. China has a prepay real estate purchase model with down payments of at least 30%. The money for development to finish these units, or to repair them, is now gone. Banking is tightening with liquidity problems and unwilling to make loans to finish the projects. With no money to finish the projects buyers are stuck with the mortgage. Some are simply refusing to continue making the payments. They can't loose homes they never possessed - but many have lost substantial sums of money with no legal recourse. Lots of finger pointing starting to happen with local government officials being rounded up - all to take some of the heat off the central CCP government.
China has had wide spread corruption that was allowed to run rampant during the boom years. Now with the boomerang effects of corruption coupled with the economic contraction, the house of cards is collapsing just like China's construction projects. Money is flowing out of China by the billions and some of it by way of underground banks in Hong Kong that the CCP is unable to stop. The rats are basically abandoning the ship.
Been hearing from the Chinese rumor mill that Xi came to the US to ask for a $900 billion bail out. One or two of the major Chinese banks are on the verge of collapse. This goes way beyond the Evergrande and Country Garden investment defaults. These failures could ripple worldwide. Smart money has seen the handwriting on the walls and have been trying to limit exposure for several years. What is worrying is the number of pension funds tied to Chinese indexes. Many pension funds are poorly managed and may not be paying attention because they have bought into the CCP propaganda illusion. If you have a pension, you may want to check your portfolio holdings.
Thank you for this. I’m not a complete financial fool, but I did not understand the China real estate issues.
You are welcome. China happenings are one of the areas I follow closely and regularly. Real estate comprises about 30% of China's GDP - so any collapse there can bring the entire system down and it is. China is in big trouble.
China is not the sparkling image the CCP has crafted for the world and Western media to see. Their Belt and Road Initiative projects are also in big trouble. Many projects have been abandoned and some are falling apart. The hydroelectric dam in Ecuador is most worrisome. It has thousands of cracks. These poorer countries that got into bed with China's predatory debt trap lending are now left holding the bag with debt to China and very little to show for it. They did not get what they were promised.
Wasn’t China also involved in Italy’s collapse? I remember the whole “hug a Chinese” Covid stunt.
Whatever the hell comes out of China, they have no problems sharing it with the rest of the world. It almost sounds like they are gearing up for a repeat. The CCP is trying to coverup whatever is taking place in Northern China. The timing of this, is troubling. The upcoming New Year holiday travel season sends Chinese all over the country. Many foreign living Chinese are getting ready to return to China for the holidays - the same thing that happened the last time. Then those foreign Chinese residents return to the countries where they are living. The visa exemption that begins in December is for France, Germany, Italy, the Netherlands, Spain and Malaysia. Even their own citizens are questioning what the CCP is up to. This can set the stage for another scamdemic. So I am following it closely.
Yes, I remember the whole CCP shill hug a Chinese stunt - especially in Commiefornia.
Italy has its own economic issues and I question the hype that came out of there over Covid. Whatever it was, mostly affected the elderly. Ground zero in Northern Italy, like Wuhan, had turned on 5G. Notice that Italy is on the list for visa exemptions.
I smell another scamdemic possibly on the horizon. The WHO is already involved. Mail-in ballots again? Remember, the WHO's changes to the International Health Regulations are getting ready to be approved in May unless there is objection. Plenty of distractions on the field to keep people from noticing.
China has been papering over a financial meltdown for several years now. So many key financial items are worth a big fat nothing. And in many cases less than nothing. I believe the ripple effect will become faster and faster. There is going to be a billion pissed off Chinese.
Will this cause them to call in our note? Or something else?