China’s debt crisis spills over into the financial sector

It turned out that Zhongrong International Trust Co, a company controlled by Chinese asset management firm Enterprise, has failed to pay dozens of coupons since late July.

In a meeting with investors, Zhongzhi Enterprise Group told its investors that it is facing a liquidity crisis and will restructure its debts. The company did not respond to questions from the press.

The liquidity crisis that Zhongzhi is going through has shown that the problems of the real estate sector in China have increased their impact on other sectors.

CONCERNS RISE

The crisis came at a critical time for Beijing, which is struggling with a two-year liquidity crisis in the real estate sector. The spread of the crisis to a company that runs the asset management business has raised concerns about the banking sector.

At the meeting with investors, the management of the Beijing-based company said that a major accounting consulting firm has been authorized to conduct a comprehensive audit and that the company is seeking strategic investors.

“Markets continue to underestimate the collapse of China’s real estate sector and its consequences,” Ting Lu, Nomura’s chief China economist, said, referring to the Country Garden property company, which defaulted on its bond payments, in his memo.

THE REAL ESTATE CRISIS GROWS

Chinese real estate development company Country Garden’s debt problems deepened when its domestic bonds were halted, while the company’s shares fell 16 percent on August 14 to a record low.

While markets were unsettled by concerns that debt problems at China’s largest private real estate development company could put pressure on homebuyers and financial institutions, forecasts for a recovery for the sector and the economy weakened. . (REUTERS, SPEAKER)