Chairpersons of two Zhongzhi-linked listed companies go missing

CHINA’S authorities have widened the scope of investigations on Zhongzhi Enterprise Group to include more executives in its affiliates.

Dalian My Gym Education Technology, an early education provider, said Wednesday (Nov 29) night that it couldn’t get in touch with its chairwoman Ma Hongying and the company is not certain of the reasons for Ma’s disappearance. A private equity subsidiary of Zhongzhi owns a 30.18 per cent stake in Shenzhen-listed Dalian My Gym.

Another Shenzhen-listed company, Xinjiang Tianshan Animal Husbandry Bio-Engineering, a cattle-breeding company, also disclosed Wednesday night that it couldn’t get in touch with its chairman Ma Changshui. Zhongzhi’s subsidiaries own 24.25 per cent of Tianshan Animal Husbandry.

The disappearance of the two executives is related to the investigations of Zhongzhi-linked wealth management firms whose money-losing bets have left investors nursing billions of yuan in losses, sources familiar with the matter told Caixin.

On Saturday night, the public security bureau of the Chaoyang district of Beijing announced it has launched an investigation into wealth management firms under the Zhongzhi umbrella, and taken criminal coercive measures against multiple suspects, including one surnamed Xie.

Although the police didn’t provide Xie’s full name, several sources with knowledge of the matter said he is Xie Zizheng, a nephew of Xie Zhikun, Zhongzhi’s founder who died in 2021.

In addition to Xie Zizheng, dozens of suspects are being investigated by the police, including senior managers and core sales personnel at the four wealth management firms, multiple sources said.

Privately-owned Zhongzhi earlier this week revealed the depth of its financial difficulties, telling investors it is “severely insolvent” with a shortfall of US$36.4 billion.

A liquidity crisis had been brewing for years at Zhongzhi, but the Zhongzhi-linked wealth management firms were able to cover it up by moving funds around different investment projects, and by constantly issuing new investment products to repay maturing ones, according to a source who once worked for one of the firms.

SEE ALSO

China wealth manager Zhongzhi flags insolvency with up to 460b yuan in liabilities

China opens probes into troubled shadow banking giant Zhongzhi

China investors face tens of billions in losses over Zhongzhi

But in the past two years, as China’s economy slowed and market sentiment soured, it became increasingly difficult for the wealth management companies to maintain the facade, the same source said. Earlier this year, the four wealth management companies and a trust firm with ties to Zhongzhi stopped making payments on multiple products they had sold to investors.

Ma Hongying is a veteran at Zhongzhi. Before being assigned to become chairwoman of Dalian My Gym, Ma was financial chief at Zhongzhi, in charge of selecting intermediary agencies for selling the group’s private placement financing products, according to a person close to Zhongzhi.

This type of product involves huge profits and many intermediaries that wanted a slice of the cake went to Ma Hongying, several former employees at Zhongzhi said.

Xinjiang Tianshan chairman Ma Changshui is also a Zhongzhi veteran. He is currently vice-president of the group. Before joining Zhongzhi, he was vice general manager of state-owned Industrial and Commercial Bank of China Ltd.’s (ICBC) asset management department.

Zhongzhi recruited multiple former ICBC executives as its trust unit, Zhongrong International Trust, got a lot of business from the state-owned bank’s asset management department, a person close to Zhongzhi said. CAIXIN GLOBAL