Former Zhongzhi Enterprise Group Chairman Sentenced in Major Shadow Banking Case

A court in Beijing sentenced former Zhongzhi Enterprise Group chairman Gao and others to prison for illegal public deposits. In facing up to 14 years in jail, their actions breached national financial laws, impacting China's shadow banking sector. Zhongzhi's collapse worsened the property debt crisis.

In a significant development, a Beijing court has handed down prison sentences ranging from four-and-a-half to 14 years to the former chairman of Zhongzhi Enterprise Group, Gao, and several others. The court's decision was based on charges of illegally taking public deposits, as reported by Chinese state broadcaster CCTV.

The executives, whose fines were not disclosed, were found to have violated national financial management laws, causing disruption to the financial order. Despite requests for comments, Zhongzhi has remained silent. Earlier, in August 2024, Gao and 48 other related officials were formally charged amidst a severe downturn in the real estate market.

Zhongzhi filed for bankruptcy in January 2024, heightening concerns over the shadow banking sector in China. The issues were first spotted in July 2023, when Zhongrong International Trust Co, a major trust company under Zhongzhi, failed to meet payment obligations. The firm later acknowledged liabilities reaching up to $64 billion. Efforts to recover funds are ongoing.

(With inputs from agencies.)