China Shadow Bank Crisis Sparks Protest by Angry Investors

Chinese investors protested outside the office of one of the country’s biggest shadow banks, in a rare show of public outrage after the firm skipped payments on dozens of investment products.

(Bloomberg) — Chinese investors protested outside the office of one of the country’s biggest shadow banks, in a rare show of public outrage after the firm skipped payments on dozens of investment products.

Videos of the incident appear to show about two dozen protesters at Zhongrong International Trust Co., demanding payment on high-yield products that were pitched as safe investments. In one of the clips posted on Wechat seen by Bloomberg News, a woman angrily asks: “Why doesn’t the company pay us back?” she says. “It has already matured. Your financial statements said there is a profit.”

The protests indicate troubles at the embattled Chinese shadow bank are deeper than previously known, and underscore how the fallout from the real estate slump is spreading to the financial sector. Many trust products sold by Zhongrong and others are backed by housing projects run by troubled developers such as China Evergrande Group.

Pressure is building across China’s financial markets given a slew of disappointing economic data, renewed concerns about the property sector and the unfolding crisis in the shadow banking system. Investors are calling for more aggressive easing by Beijing as the incremental policies have so far failed to revive confidence. A selloff in Chinese assets deepened on Wednesday, with the MSCI China Index down as much as 1.3%. 

Read more: Country Garden Warns on ‘Major Uncertainties’ in Bond Payments

Zhongrong is among the biggest firms in the country’s $2.9 trillion trust industry, which pools savings from wealthy households and corporate clients to make loans and invest in real estate, stocks, bonds and commodities. The firm has 270 high-yield products totaling 39.5 billion yuan ($5.4 billion) due this year, according to data provider Use Trust. 

Chinese authorities have already set up a task force to study any possible contagion from the shadow banking group, which manages about $138 billion. The firm said it has no immediate plans to make clients whole.

“Given the recent net asset value markdowns and redemptions, we expect growth in trust products to slow, which could result in tighter property financing conditions, and affect banks’ earnings and balance sheets,” Goldman Sachs Group Inc. analyst Shuo Yang wrote in a note. 

Wang Qiang, board secretary of the firm partly owned by financial giant Zhongzhi Enterprise Group Co., told investors in a meeting earlier this week that the firm missed payments on a batch of products on Aug. 8, adding to delays on at least 10 others since late July, according to people familiar with the matter. At least 30 products are now overdue and Zhongrong also halted redemptions on some short-term instruments, one of the people said. 

Cash Crunch

Wang said liquidity at the firm has suddenly dried up. The company is facing a “tsunami” of questions from investors and their own wealth managers, according to people familiar, who asked not to be identified because the meeting was private. Wang asked for patience as the firm seeks to recoup the value of its investments.

Zhongzhi is among the private wealth managers that Beijing has been trying to rein in for years to minimize risks for the hundreds of thousands of retail clients who buy these products assuming they’re safe. China is already struggling with a weak economy and fallout from the property slump that’s threatening to push giants like Country Garden Holdings Co. into default. The central bank on Tuesday cut interest rates by the most in three years in a bid to revive growth.

According to Bloomberg Economics, the trust sector’s exposure to real estate is about 2.2 trillion yuan, or 10% of total assets as of the end of 2022. Zhongrong is the ninth-biggest trust, with about 600 billion yuan in assets.

“The big danger is that a negative feedback loop kicks in, with property stress causing strains in the financial system, undermining credit expansion and depressing growth, which, in turn, exacerbates the slump in the property sector,” Bloomberg Economics said in a note.

Zhongrong investors are now losing patience. Many bought the products paying as much as 7% annual interest, betting they would be a safe bet as Chinese stocks and real estate prices tumble. 

The protesters in Beijing were met by about 10 police and security officers, while a company official tried to keep the peace.

One woman is heard shouting: “Give us the money back, or we will die here.” Another says: “Why you don’t give us a clear explanation?”

Read more: China Shadow Bank Misses Dozens of Payments as Risks Grow

A reporter who visited the Zhongrong office Wednesday afternoon didn’t see any protesters but there was an unusually heavy police presence around the building. Officers were seen sitting in several police vans and cars parked inside and outside the office compound, and other police vehicles were placed on roads nearby. 

Officers were also watching the area from inside one of the several city buses that were parked at the main gate or nearby. Workers were erecting extra fencing around the building.

Police in Beijing didn’t immediately respond to a request for comment.

Protests over financial disputes are fairly common in China but the authorities are unlikely to tolerate them for long, especially in the capital where authorities prize stability.

Police quickly broke up demonstrations in Beijing and other cities late last year over the government’s harsh Covid Zero rules. Officers maintained a presence for days at the site of the unrest to deter any repeat.

Shortly afterward, China started dismantling Covid Zero yet still arrested several people on a catch-all charge called “picking quarrels and provoking trouble.” A conviction on that charge can mean up to five years in prison. It is unclear how their cases were resolved. 


A series of demonstrations also erupted in 2022 in the central province of Henan over a suspected financial scam. Police and protesters clashed as hundreds of people demanded the return of deposits worth up to tens of billions of yuan.

(Adds details of missed trust payments throughout)

More stories like this are available on

©2023 Bloomberg L.P.