China opens probe into troubled shadow bank Zhongzhi

The Chinese authorities said they had opened criminal investigations into the money management work of the large shadow banking company, Zhongzhi Enterprise Group.

In a statement on the “Wechat” platform, Beijing police said they had taken “mandatory criminal proceedings” against many suspects, referring to one of them by the last name Xi.

The police called on investors to report wrongdoing or provide evidence to the authorities, including filing complaints online.

Legal terms were used to describe the situation similar to that used in the case of China Evergrande Group’s billionaire chairman Hui Ka-yan, where Evergrand said last September that Hui was suspected of crimes.

Zhongzhi, a private company, revealed earlier this week the depth of its financial difficulties and notified investors that it was “severely insolvent,” suffering a deficit of $36.4 billion.

The Wealth Management company said its liquidity had dried up and expected the recoverable amount of asset disposal to be low, according to Bloomberg.

Zhongzhi first raised concerns in August after one of its subsidiaries failed to make payments to customers on high-return investment products.

The group’s financial difficulties fuel the challenges faced by Chinese President Xi Jinping, as officials face a real estate crisis and a weak economy.