China’s real estate crisis is spilling into the financial sector. A major wealth manager just told investors it can’t pay off its obligations with billions of dollars in debt worth twice the company’s assets.
Zhongzhi Enterprise Group, or ZEG, issued a disclosure letter on Wednesday.
As a major player in China’s shadow banking sector, ZEG stores and manages money like a standard bank, but it offers higher returns for investors.
In China, wealth managers like ZEG combined makeup roughly the size of the French economy.
The company’s business spans from real estate to mining, to electric vehicles.
And includes investment in Chinese developer Evergrande. The now-infamous company earned the title of the world’s most in-debt real estate firm —buried under $300 billion in obligations.
Some analysts expect Beijing to step in to stem a wider fallout, but an expert says, helping the sector with state money would only make the coming burst bigger. Leading to future problems.