A disgruntled Chinese investor stabbed the chief executive of an asset management company, the latest sign of escalating tension in the country’s financial system amid rising defaults, the Financial Times revealed yesterday.
According to the FT, Wang Jie, chief executive officer of Global Wealth Investment (Beijing), was rushed to hospital after an investor stabbed him during a meeting on Sunday, opening a wound of about 15cm in his shoulder, Caixin, a respected financial news website first reported. The alleged assailant had invested Rmb300,000 (USD47,300) in a wealth management product that failed to pay out as promised.
The newspaper revealed that the incident stems from the collapse of Hebei Financing Investment Guarantee Group, one of China’s largest state-backed guarantors. Global Wealth and other financial institutions sold investment products backed by loans guaranteed by Hebei Financing.
In August, a group of 11 non-bank lenders wrote to top Communist party officials in Hebei province warning of “unnecessary social influence” if the government failed to bail out Hebei Financing and thus enable the guarantor to honor its obligations and insulate investors from losses, the FT stated.
Mr Wang also wrote separately to Hebei officials that same month, noting that Hebei Financing had failed to honor guarantees on loan defaults by five companies worth Rmb227m and affecting 660 investors in Global Wealth products. Caixin said the amount owed to Global Wealth by the guarantor is now Rmb620m.
High-yielding wealth management products have surged in popularity since 2010 as investors sought alternatives to a frothy property sector, volatile stock market and bank deposits on which interest rates are subject to government caps. The proceeds of such products typically flow to higher-risk borrowers unable to obtain bank loans or issue bonds.
Intense demand for high-yield products, combined with loose regulation, has also created opportunities for outright hucksterism and fraud, sparking widespread protests.
The Financial Times notes that Global Wealth has not been accused of any wrongdoing. Phone calls and emails to the company went unanswered yesterday. The company’s office in Beijing was locked. A note taped to the door said a “criminal incident” had occurred there on Sunday but did not elaborate.
Hebei Financing guaranteed loans by Global Wealth to steel, glass and paper manufacturers as well as to a commercial property development, the paper added.
China’s property and basic manufacturing sectors are grappling with oversupply and falling prices as the economy slows. Rust-belt regions like Hebei province, in north China near Beijing, have been especially hard hit.
In early September, Hebei officials published a “risk disposal” plan to deal with the fallout from the guarantor’s collapse, but it was short on detail and so far creditors remain unpaid.
Hebei Finance owes around Rmb50bn to various institutions.
Mr Wang was meeting with investors on Sunday to update them on efforts to recoup lost funds when he was stabbed. The alleged assailant had been sitting next to him at the meeting and initially acted normally, Caixin reported a witness as saying.
Mr Wang’s condition was initially life-threatening but had stabilized by midday on Monday, according to Caixin.
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