(Yicai) Nov. 23 -- Chinese asset management firm Zhongzhi Enterprise Group has apologized to investors for the high risk of insolvency due to its principal and interests of its liabilities exceeding CNY420 billion (USD58.7 billion) and defaults on related products.

The carrying amount of Zhongzhi’s total assets is about CNY200 billion, the Beijing-based company said in an open letter yesterday. The principal and interests of related liabilities after excluding margins are between CNY420 billion and CNY460 billion, it added.

Zhongzhi’s founder and actual controller Xie Zhikun suddenly passed away on Dec. 18, 2021, at the age of 61. After Xie’s death, many executives and core staffers stepped down or resigned. Zhongzhi and its units were highly dependent on Xie, so his and other key staffers’ absence led the internal management system to a state of failure, the company said.

Zhongzhi took over several real estate projects but failed to revitalize them as expected. As China restricted the property sector from getting bank loans, Zhongzhi’s unit Zhongrong International Trust became the new financing source for real estate firms.

Zhongrong International Trust’s investment in the property industry accounted for 6.6 percent of the total in 2017 but reached 18 percent in 2020, according to China Real Estate Business. Struggling Chinese developers China Evergrande Group, China Fortune Land Development, Kaisa Group Holdings, Sunac China Holdings, and Shimao Group Holdings all established partnerships with Zhongrong.

Founded in 1995, Zhongzhi controls 10 listed firms and controls or holds equities in six licensed financial institutions, five asset managers, and four wealth managers.

Editor: Futura Costaglione