Largest shareholder of troubled Chinese shadow bank plans to delist

NEW YORK – The largest shareholder of the Chinese trust company at the heart of

the country’s shadow banking crisis

plans to delist its shares due to “significant uncertainties”, raising more concerns about financial contagion in the US$18 trillion (S$24 trillion) economy.

Jingwei Textile Machinery said in a filing on Tuesday that it plans to pull its shares from the Shenzhen Stock Exchange, a rare move by a central government-backed enterprise. The company also cited “market changes” for the move, aimed at protecting the interests of smaller shareholders.

While the company made no reference to Zhongrong International Trust, Jingwei ranked as the top shareholder of the embattled shadow bank with a 37.5 per cent stake, according to Zhongrong’s annual report for 2022. Zhongzhi Enterprise Group, one of China’s largest private wealth managers, ranked second.

“Listed companies are under global scrutiny, which is not helpful when operations are failing,” said Mr Andrew Collier, managing director at Orient Capital Research, adding that the delisting is most likely related to Zhongrong.

China’s US$2.9 trillion trust industry is emerging as the latest threat to the world’s second-largest economy, as the sector faces another round of losses that Goldman Sachs analysts say may swell to US$38 billion.

Zhongrong, which has been a major backer of troubled real estate developers,

has missed payments on dozens of investment products

and has said it has no immediate plans to make clients whole. The company has 270 high-yield products totalling 39.5 billion yuan (S$7.5 billion) due in 2023, according to data provider Use Trust. 

Jingwei said it risks delaying the release of its first-half earnings due on Thursday, according to a separate statement, among more than a dozen exchange filings. Shares would be suspended from trading on Friday in that case, it added.

The company planned to resume trading on Wednesday after a two-day halt. The stock has fallen 20 per cent in 2023, compared with a 2.1 per cent decline in the benchmark CSI 300 Index. The company has a market value of 4.21 billion yuan.

Jingwei said on Tuesday that it will hold an extraordinary general meeting on Sept 15 for shareholders to vote on its delisting plan. The company does not plan to relist its shares, which will be traded on the National Equities Exchange and Quotations instead. BLOOMBERG