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China stocks fall after Zhongzhi Enterprise Group files for bankruptcy
The Shanghai Composite in China tumbled on Monday, alongside the Hang Seng in Hong Kong. This plunge is dragged by healthcare stocks and the banking sector after shadow banking conglomerate Zhongzhi Enterprise Group filed for bankruptcy liquidation late Friday. The conglomerate is unable to repay its debt amid a deepening real estate crisis in the country. Shadow banks in China operate by pooling household and corporate savings to offer loans to invest in real estate, stocks, bonds, and commodities, and they have often financed many large Chinese property developers. Non-bank debt is something that the Chinese government has been watching very closely, trying to limit its growth. But the largest banks in China are state-owned, making it harder for non-state-owned businesses to tap traditional banks and therefore making a case for shadow banks.
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