BEIJING (Reuters) – Shanghai police are investigating Hywin Wealth Management for suspected illegal fundraising, the police said, after the Chinese wealth management firm last year failed to pay out clients that had bought its investment products.
Hywin, a small firm whose products are primarily invested in real estate, is yet another financial entity that has been caught in the liquidity crunch that has affected China’s highly indebted property sector since 2020 and which has impeded economic growth and rattled global markets.
Shanghai Municipal Public Security Bureau’s Fengxian branch said they had taken “criminal coercive measures” against suspects involved with the company, according to a statement released Wednesday on its WeChat account.
The police also said they would “protect the legitimate rights and interests of investors to the greatest extent possible”.
Hywin did not immediately reply to a Reuters request for comment.
Hywin said in December last year it had been unable to promptly fulfil client redemption requests. It has total disclosed assets of 2.37 billion yuan ($328 million) as of end of June last year.
In January, the company said was reviewing its assets and that it would need restructure its debts to save itself.
Shares of its Nasdaq-listed entity Hywin Holdings Ltd had slumped after it missed payments on some products last December. In June this year, Hywin Wealth Management ceased to be a consolidated entity of the listed firm, which was renamed to Santech Holdings, and is now controlled by founder Han Hongwei.
Zhongzhi Enterprise Group, once a major player in China’s shadow banking sector, declared insolvency last year. The group filed for bankruptcy in January, fuelling investor protests and worries that China’s property meltdown was spilling over into its $66 trillion financial industry.
Zhongzhi had used aggressive and potentially illegal sales practices to sustain its operations as it lurched toward collapse, Reuters reported.
(Reporting by Beijing Newsroom; editing by Miral Fahmy)
