In fresh blow to China, shadow bank misses payments of investment products

A leading Chinese trust firm has missed payments on dozens of investment products since late last month, a senior official has told investors, adding to fears of a spillover impact in the financial sector from the country’s worsening property crisis.

Zhongrong International Trust has short-term liquidity troubles, the company’s chief compliance officer Wang Qiang told dozens of investors at the company’s headquarters in Beijing on Monday, according to a person who was at the meeting. 

Wang told the investors the firm has no immediate plans to meet repayment obligations for dozens of products that have matured, the person said, declining to be identified due to the sensitivity of the matter. Zhongrong managed assets worth 785.7 billion yuan at the end of 2022, out of which 629.3 billion yuan were linked to trust products, according to its latest annual report. Zhongrong and the National Financial Regulatory Administration, the banking sector regulator, did not immediately respond to Reuters' request for comment. 

New home prices also fell in China for the first time this year in July, the latest in a string of downbeat data that points to a rapid loss in broader economic momentum and underlines the urgency for more bolder policy support to shore up activity. The 0.2% fall month-on-month came after June's flat reading,

Missed payments on investment products by a leading Chinese trust firm and a fall in home prices have added to worries that China's deepening property sector crisis is rapidly stifling what little momentum the economy has left. 

Amid these, the country said on Wednesday that its economic recovery “will be a bumpy and tortuous process”, but insisted Western critics “will for sure be proven wrong”.