More executives go missing in China — this time linked to troubled shadow bank Zhongzhi

Hong Kong (CNN) — Two Chinese business executives at companies controlled by the embattled financial conglomerate Zhongzhi have gone missing, according to statements by their respective firms.

The development comes just days after Chinese authorities launched a criminal investigation into the troubled shadow bank, one of China’s largest. Last week, Zhongzhi told its investors that it is “severely insolvent.”

Dalian My Gym Education Technology, a listed education firm, said it is unable to get in touch with its chairwoman Ma Hongying.

“The company is not sure of the specific reason why it cannot get in touch with Ms. Ma Hongying,” the company said in a filing to the Shenzhen Stock Exchange on Thursday.

On the same day, Xinjiang Tianshan Animal Husbandry Bio-engineering, which breeds cattle and dairy cows in the Xinjiang region, said it had lost touch with its chairman Ma Changshui.

Both companies are controlled by Zhongzhi’s investment units, and the missing executives have been connected with the conglomerate for years.

Ma Hongying, 38, has served as Zhongzhi’s chief financial officer since 2015, according to the company. She was appointed as the chairwoman of Dalian My Gym Education Technology in 2022, a few years after Zhongzhi acquired control of the company through a share purchase deal.

Ma Changshui, 59, serves as the vice president of Zhongzhi along with his position at the animal breeding firm. He was previously the chief risk control officer of the group.

Beijing-based Zhongzhi controls nearly a dozen asset and wealth management firms. It is considered part of China’s $3 trillion “shadow banking” industry, a sector that forms an important source of finance in the country. The term usually refers to financing activity that takes place outside the formal banking system, either by banks through off-balance-sheet activities, or by non-bank financial institutions, such as trust firms.

It did not immediately respond to a request for comment.

The company’s financial problems began after its founder, Xie Zhikun, died of a heart attack in December 2021.

Concerns about Zhongzhi’s finances were first triggered in August when a trust it partially owns — Zhongrong International Trust — missed payments to individual and corporate investors. That sparked protests by angry investors and prompted worries that a slump in China’s property market could trigger a wider financial crisis.

Zhongzhi’s trust banking unit has invested about a tenth of its money in real estate. But several companies in its real estate portfolio have struggled with a cash crunch in the past few years, with some filing for bankruptcy.

Zhongzhi apologized to its investors last week and acknowledged that its liquidity had been “exhausted.” It said that since the death of its founder, and the subsequent resignations of senior executives, its internal management had slid into a state of “failure.”

Days later, Beijing police announced a probe into the company’s wealth management unit, suspecting it of “illegal crimes.” They said they had enforced “mandatory criminal measures” against a number of suspects, including one surnamed Xie.

Business leaders in China are under immense pressure, as the country’s leader Xi Jinping intensifies a regulatory crackdown on companies and strengthens Beijing’s control of the economy.

This year, more than a dozen top executives from sectors including technology, finance and real estate have gone missing, faced detention or been subjected to corruption probes.

Just last month, reports emerged that the chairman and CEO of Chinese video game live-streaming platform DouYu had become unreachable. The company later said that he had been arrested by authorities.

Even international consulting firms have been caught up in the sweep. They face rising risks, including the possibility of police raids and the detention of staff, in the world’s second largest economy.

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