Chinese Authorities Investigate Zhongzhi Enterprise Group Over $36 Billion Shortfall

The shadow bank's severe insolvency could pose a threat to China's financial stability.

Zhongzhi Enterprise Group, one of mainland China’s largest shadow banks, is under investigation by Chinese authorities following a reported US$36 billion shortfall.
Several suspects, including individuals related to the company's late founder, have been detained as part of the investigation.
Zhongzhi's liabilities have reportedly ballooned to 420 billion yuan (US$58.8 billion) while assets sit at just 200 billion yuan, indicating a severe insolvency.
The company's crisis could threaten the stability of China's financial system, as it is a major player in the country's $3 trillion shadow banking sector.
Signs of trouble first surfaced in August, when Zhongzhi’s subsidiary, Zhongrong International Trust, delayed payment of maturing wealth products amid a liquidity crunch.