In this wave, the rich have become leeks

Note: This article was originally written by Xinzhi Business Observer, and it is prohibited to reprint without permission.

If an enterprise suddenly appears in the field of public opinion, it is either in its high-speed development stage or when it explodes. Obviously, Zhongzhi Enterprise Group Co., Ltd. (hereinafter referred to as Zhongzhi Group) belongs to the latter.

On the evening of November 25, the Chaoyang Branch of Beijing issued a notice to investigate the suspected illegal crimes of the wealth company belonging to the "Zhongzhi Department", and took criminal coercive measures against Xie Moumou and other criminal suspects.

Since the death of the founder Xie Zhikun due to illness two years ago, the Chinese plant system has once again come to the forefront.

The case was filed and the relevant executives were arrested, which was related to an open letter released by it.

On November 22, Zhongzhi Group issued an open letter to investors. In this letter, Zhongzhi Group admitted that there is a problem with the financial situation, according to the intermediary agency simulation of the merger caliber of the group's total assets book amount of about 200 billion yuan, due to the group's assets concentrated in debt and equity investment, long duration, difficult to receive, is expected to be low recoverable, liquidity depletion, asset impairment is serious, and the scale of debt of Zhongzhi Group is huge, after excluding the principal, the scale of related liabilities is about 420 billion - 460 billion. At present, there has been a substantial breach of contract in the plant-related products.

In other words, Zhongzhi Group has become seriously insolvent and has significant operational risks.

In the past two years, this kind of situation is not uncommon, and many real estate companies have started with this situation, and then they are out of control.

Zhongzhi Group is a veteran capital in China, founded in 1995, its founder Xie Zhikun was originally a worker in Heilongjiang Printing Factory, when the printing plant suffered serious losses, he led the printing factory to improve efficiency, and became the director of the printing plant. Later, Xie began to get involved in many fields such as pasta, clothing, wood storage, cement, and aquaculture.

The first pot of gold of Zhongzhi Group came from the remuneration obtained by Xie Zhikun from purchasing and reselling Korean pine resources in large quantities. To this day, the business is still full of fog, and all parties are full of curiosity about Xie Zhikun's red pine business.

After the establishment of Zhongzhi Group, its main business mainly revolved around timber and wood semi-finished products, until Xie Zhikun took a ride on real estate, went out of Heilongjiang, and acquired land for development in Beijing, Shanghai and other regions.

In just a few years, Zhongzhi Group accumulated original capital and set its sights on the financial field, and began to invest in Harbin Trust Company in 2001. In the later period, Zhongzhi Group took over Harbin Trust and Investment Company through cooperation with five enterprises represented by Heilongjiang Mudanjiang New Materials, and rebuilt it as Zhongrong Trust Company, and the well-known "Zhongzhi Department" also began to take shape at this moment.

Zhongrong Trust is the starting point of the "Zhongzhi system", and since then, Zhongzhi Group has been involved in finance, real estate, education, science and technology, new energy and other industries through trust, insurance, futures, public offering, private placement and other channels.

Although the public information has modified the operation model of the planting system, its overall logic is simple and direct, that is, to raise a large number of high-net-worth customers through the asset management plan, and then invest a large number of funds in real estate enterprises, listed companies, etc., to participate in the capital operation of related enterprises, and make profits from it.

Xie himself deeply agrees with this business model, he believes that finance is to make quick money, and the more financial assets he controls, the better.

As he expected, the four major wealth management groups under the Zhongzhi system - Hengtian Wealth, Xinhu Wealth, Datang Wealth, and Gaosheng Wealth, control assets of more than 3.72 trillion. Among them, Hengtian Wealth is the largest, with a cumulative asset allocation scale of 1.5 trillion yuan, followed by Xinhu Wealth, which has a cumulative asset allocation scale of more than 1.3 trillion yuan.

Even the smallest Gaosheng Fortune has an asset allocation scale of more than 100 billion.

However, the excitement of the burning oil period cannot be taken seriously, and only when the tide recedes can you know who is swimming naked. In the second half of 2021, real estate companies led by the leading real estate company Evergrande exploded one after another, bringing a long-lasting and violent real estate storm, which suffered not only ordinary people who bought unfinished buildings, but also financial institutions that heavily invested in real estate companies.

In December 2021, Xie Zhikun, who was only 60 years old, passed away suddenly.

Like his family history, Xie Zhikun's death is also full of mysteries, he suddenly fell ill while doing Pilates exercises in his office, and died after the treatment failed. There is also a theory that Xie Zhikun committed suicide, he locked the door, and when the people found out, he had been strangled by a yoga rope, and the rescue was ultimately ineffective.

Xie Zhikun has always been low-key, generally does not accept media interviews, and the outside world's perception of him, in addition to the mysterious capital predator, has another identity - the husband of singer Mao Amin. It is worth mentioning that after the death of Xie Zhikun, Mao Amin gave up an inheritance worth 26 billion yuan and handed over Zhongzhi Group to Liu Yang, the nephew of Zhikun.

At that time, the trillion-dollar giant ship of the planting system has shown fatigue, and it is rumored that the funds it pays every day are as high as 5 billion, and the pressure on capital turnover can be imagined.

Since then, the situation of the Chinese plant system has not improved. According to public information, the asset-liability ratio of Zhongzhi Group is as high as 94%, and such a debt scale is obviously beyond the company's ability to bear. The successive losses of the planting system in the stock market and real estate have also made its financial situation more and more worrisome.

In June 2023, Zhongzhi Group had the first overdue payment of wealth management products, involving an amount of 1 billion yuan.

On July 19, the four major wealth companies of Zhongzhi Group, Xinhu Wealth, Datang Wealth, Hengtian Wealth, and Zhongzhi Wealth, announced the suspension of all fundraising and redemption of Zhongzhi Group's debt products, involving an amount of up to 230 billion yuan.

On September 15, Zhongrong Trust, a subsidiary of Zhongzhi Group, admitted for the first time through an official announcement that due to multiple internal and external factors, some of the company's trust products could not be paid on time.

It was not until the open letter on November 22 that the fig leaf of this huge financial empire was completely lifted, and the former robe was crawling with lice, and the trillion-dollar financial empire collapsed.

There are many reasons for the explosion of the planting system, but many people in the industry believe that the real estate detonated the thunder of the planting system.

As mentioned above, the explosion of real estate companies led by Evergrande in 2021 has brought an unprecedented storm, and the middle planting system of heavy real estate has suffered greatly.

In fact, the relationship between the planting system and real estate has a long history, and behind many real estate events, there are planting systems involved.

For example, in the Baowan dispute, which is known as "China's No. 1 business war", Baoneng's boss Yao Zhenhua spent a lot of money to enter Vanke, which eventually led many forces to protect Vanke. In 2016, Evergrande acquired a 4.68% stake in Vanke for 9.1 billion yuan, and behind this transaction, there is Zhongzhi Group.

Similarly, in 2017, Kaisa resumed trading, and Zhonghai Shengrong, a subsidiary of Zhongzhi, acquired 51% of the shares of Kaisa's Shenzhen Nanmendun Urban Renewal Project, supporting Kaisa's restart.

The actions of the Zhongzhi system are continuous, and the proportion of real estate in the group has also increased significantly - public data shows that from 2017 to 2020, the proportion of Zhongrong Trust invested in real estate under Zhongzhi Group was 6.61%, 10.99%, 17.65% and 18% respectively, which has tripled in a few years.

Delving into its development logic, we can find that the essence of the development logic of the planting system and real estate is approaching, and it is constantly spreading out and expanding the overall scale through incremental expansion. However, there are variables in the market after all, and the stalls that are too big cannot be recovered.

In the second half of 2021, the root cause of the explosion of many real estate companies was that there were problems with capital turnover, and the original incremental expansion model was unsustainable, and finally fell like dominoes.

As of December 31, 2021, there were 1,187 surviving trust plans of Zhongrong Trust, with assets under custody of 638.7 billion yuan, and the scale declined year-on-year. Among them, the huge amount of real estate trusts held by Zhongzhi reached 89.555 billion yuan, accounting for 14.02% of the investment ratio, becoming a big thunder.

Since 2022, a number of real estate trusts held by Zhongrong Trust have announced defaults or extensions, and yields have been sluggish. At the same time, the development of the plant itself also has a lot of difficulties, its holding or shareholding of listed companies, operating performance and market value performance is not satisfactory, the plant system of capital turnover is more and more difficult.

However, it is obviously unfair to blame the explosion of the plant system on real estate, and the operation of the plant system itself

Ideas also account for a large part of the reason.

The thunderstorm of the planting system is directly related to the fixed financing products it launched.

Fixed financing is a kind of non-standard directional financing pool, so the threshold is extremely high, and the investment amount of a single investor exceeds 3 million, and the largest fixed financing involved in the thunderstorm of the planting system is as high as 5 billion. In order to attract high-net-worth individuals, the annualized interest rate of the fixed financing products launched by Zhongzhi is very high, and the annualized rate of many products is as high as 8%, and even 9% annualized.

In addition, the planting system will also give the salesman 2%-3% commission, plus operating costs and other expenses, industry insiders estimate that the financing needs to earn more than 15% of the income, in order to achieve the conditions for returning to the capital.

If it is in the period of economic boom, the planting system can achieve this income and balance the income and expenditure through capital operation means. Unfortunately, in 2021, the real estate fell to the ground, and then the stock market went all the way down, and the economic situation was much worse than before.

Therefore, it is only a matter of time before the middle plant system explodes.

Although the planting system is a financial company, its thunderstorm, in essence, is no different from the Evergrande thunderstorm, which is a huge crisis caused by "self-financing" - the Evergrande thunderstorm starts from the inability to pay the 40 billion cash financed by Evergrande's wealth;

But the thunder of the planting system is more terrible than Evergrande.

Although Evergrande has a lot of messes, its essence is a real estate company, and on top of its huge debt of 2.4 trillion yuan, it also has land assets worth 1.9 trillion yuan. Zhongzhi, on the other hand, is an out-and-out financial company, with terrifyingly few physical assets and more debt and equity, which will depreciate in large amounts.

Some employees of the planting system revealed that there were 50,000 high-net-worth investors, nearly 5,000 corporate customers, 13,000 professional financial planners, and 230 billion creditor's rights and interests involved in the incident.

The oldest investor is over 90 years old.

In August this year, it was rumored that the investor went to a wealth company under Zhongzhi Group to ask for an explanation, and because of his emotion, the investor drank poison and was then sent away by 120 for rescue.

In the face of investors' questions, a member of the risk management team of Zhongzhi Group replied: "Mr. Xie, the actual controller of Zhongzhi Group, has passed away, and Mr. Liu Yang is just a professional manager like us..."

This member is nothing more than shirking responsibility, and the current payment problem should be taken care of by the actual controller, the late founder Xie Zhikun, who is not responsible for these executives, because they are only professional managers. Even Liu Yang, Xie Zhikun's nephew, is just a senior worker.

In the open letter on November 22, Zhongzhi Group said that "according to the intermediary agency simulation of the merger of the calculation of the group's total assets book amount of about 200 billion yuan, because the group's assets are concentrated in debt and equity investment, the duration is long, the difficulty of clearing, the expected recoverable amount is low, liquidity is exhausted, and the asset impairment situation is serious."

Because of this, just 3 days after the thunderstorm in the planting system, the public security of the Beijing Chaoyang Branch issued an announcement to take criminal measures against Xie Moumou, a senior executive of Zhongzhi, and others.

Compared with "Xie Moumou", the word "etc" in the police report, the amount of information is more, and some insiders revealed that the police took criminal measures this time, including the chairman of the four major wealth institutions in the planting system, legal persons, core executives, etc., almost the core personnel are wiped out.

And this kind of huge financial institution like the Zhongzhi system involves a wide range, and the arrest of the police may be just the beginning.

Behind the thunderous means is a big thunder that is exploding.

The explosion of financial institutions is a complex systemic cause, which is often the result of a combination of factors. Among them, poor risk management, economic cycles and market volatility are the main factors for financial institutions to burst mines.

Taking the planting system as an example, its investment in real estate has increased year by year, while obtaining high returns, it ignores the high risk behind it. After the real estate problems and the explosion of many real estate companies, Zhongzhi Group failed to recover the situation in time and gave up in time.

A lot of thunder was planted long before Xie Zhikun died.

In the two years since Xie Zhikun's sudden death, the executives of the planting system have not taken corresponding measures, but have gone further and further on the road of self-financing, borrowing the new to repay the old, and finally there is no way to borrow, and the capital turnover has completely problems, causing a landslide.

The market shock caused by real estate is continuous, and the economic downturn and instability may also lead to an increase in market risks, the asset quality of financial institutions has declined, and the asset value of the planting system has dropped sharply.

It is important to note that the thunderstorm in the financial markets is contagious, and the plight of one institution can trigger negative effects on others, as we have seen in Evergrande before.

Therefore, on the occasion of the explosion of Zhongzhi, we should also worry about another thing -

Beware of the next "Zhongzhi" appearing!