Beijing Court Orders Liquidation of Zhongzhi Group and 316 Affiliates; Creditors Must File Claims by June 10

The clock is now ticking for thousands of investors tied to one of China’s biggest shadow‑banking blowups.

Beijing’s No. 1 Intermediate People’s Court has ordered the bankruptcy liquidation of Zhongzhi Enterprise Group and 316 affiliated companies, and has told creditors they must file claims online by June 10. The move shifts a long‑running corporate collapse into a decisive new phase that will determine how much money, if any, creditors can recover.

The court’s decision, made public in a notice dated April 10, uses a tool in Chinese bankruptcy practice known as “substantive consolidation.” In effect, the court is treating Zhongzhi and hundreds of its affiliates as a single economic unit for liquidation, rather than trying to unwind each company separately.

The order applies to Zhongzhi Enterprise Group, a privately held conglomerate founded in 1995, and 316 companies linked to it. The network, often referred to in Chinese media as the Zhongzhi “system,” sprawled across wealth management, trust products and other investment vehicles that funneled money from retail and institutional investors into property and other assets.

In a summary of the announcement, financial outlet Caixin reported that “The court said … creditors must file claims online by June 10.” The official creditor‑notice and claim forms are being published through China’s national enterprise bankruptcy information portal, which serves as the central online platform for such cases, and through the Beijing court’s own channels.

The court appointed Beijing Dacheng Law Offices as the case administrator responsible for managing the liquidation, a role similar to a trustee in other jurisdictions. Caixin has identified Dacheng partner Zheng Zhibin as the lead manager.

The administrator’s role includes verifying creditor claims, taking inventory of the group’s assets, organizing asset sales and drafting a plan for distributing proceeds under court supervision. According to recent court disclosures reported in Chinese media, some stakeholders challenged Dacheng’s appointment, arguing the firm had prior business ties with Zhongzhi‑related entities. The court acknowledged that Dacheng had previously provided services to some affiliates but decided to keep the law firm in place.

The April order is the latest step in a process that began more than two years ago. On Jan. 5, 2024, the Beijing court formally accepted a bankruptcy liquidation case for Zhongzhi Enterprise Group and designated an administrator. As the extent of the corporate tangle became clearer, the administrator applied in June 2024 to consolidate the proceedings across many affiliates, initially covering around 248 companies.

On Feb. 6 this year, the administrator sought and received court approval to widen that consolidation to 316 entities. The April notice marks the point where the court not only confirms that substantive consolidation but also opens a unified window for creditors to file claims.

Substantive consolidation is used in China when a group of formally separate companies is found to have deeply intertwined assets and liabilities, or when their corporate identities are blurred to the point that separating them would be impractical or unfair to creditors. In reports on the Zhongzhi case, the administrator has said its investigation found highly interwoven finances and what it described as “legal‑person identity confusion” among affiliates, meaning boundaries between individual companies were not clearly maintained.

The sums at stake are large even by the standards of China’s vast financial system. Media estimates cited across multiple reports put Zhongzhi‑related assets at roughly 200 billion yuan (about $28 billion), against total liabilities in the 420 billion to 460 billion yuan range. That implies a funding gap of up to 260 billion yuan, or around the mid‑$30 billion range at recent exchange rates.

Those figures remain estimates; part of the administrator’s task is to establish an official inventory of assets and a verified list of claims. But if broadly accurate, they would make Zhongzhi one of the largest private shadow‑banking failures to enter full court‑ordered liquidation in recent years.

The fallout extends well beyond the core companies. Creditors include direct lenders to the 316 named entities, investors in Zhongzhi‑linked wealth‑management and trust products, and companies that did business with Zhongzhi on credit. In past filings, several listed firms on China’s stock exchanges have disclosed exposures to Zhongzhi or its affiliates, warning shareholders that they might need to write down investments or receivables.

For many retail investors, the liquidation is the latest chapter in a saga that began when some Zhongzhi‑related products stopped making payments amid broader stress in China’s property sector. The June 10 deadline now gives them a firm date by which they must assemble documentation and register their claims if they hope to participate in any eventual payout.

The civil bankruptcy case is unfolding alongside criminal proceedings targeting individuals tied to the group. In December 2025, Chinese courts sentenced several Zhongzhi management figures for the crime of “illegal absorption of public deposits,” according to published judgment summaries. Sentences ranged from four years and six months to 14 years in prison, along with fines.

The criminal verdicts have been cited by prosecutors and commentators as evidence that parts of the Zhongzhi system raised money from the public in ways that violated financial regulations. That, in turn, reinforces the court’s view that the conglomerate and its affiliates operated less as a collection of independent companies and more as a single, improperly run financial machine — strengthening the legal case for handling them through a consolidated liquidation.

For regulators and policymakers, the Zhongzhi case is also a test of how China deals with complex failures outside the formal banking system. Shadow‑banking groups like Zhongzhi have long played a role in channeling credit to sectors such as real estate, often through opaque structures that promised relatively high returns to investors while operating under lighter oversight than banks.

Authorities have spent years trying to rein in such risks. But when a large group unravels, officials face a balancing act: enforcing the law and deterring future misconduct, while also containing financial contagion and addressing public anger from investors who believed their money was safe.

The Beijing court’s decision to merge 316 companies into one liquidation process aims to prevent a scramble among different creditor groups and reduce the risk that assets are shifted or dissipated across affiliates. It also centralizes the process for investors, who might otherwise have to navigate dozens of separate cases.

What remains unclear is how much creditors will eventually recover and over what time frame. After the June 10 claims deadline, Dacheng and the court will need months, if not longer, to sift through claims, value assets and design a distribution plan that complies with China’s Enterprise Bankruptcy Law, which sets priorities for paying employees, tax authorities, secured creditors and unsecured creditors.

For now, the key date is fixed. Creditors who fail to lodge claims by June 10 risk being left out of the initial distributions, even if they may be able to file later under stricter conditions. For investors who poured money into Zhongzhi’s promise of higher‑yielding financial products, the court‑ordered liquidation will determine how much of that promise survives. The outcome could also serve as a template for how China confronts the next major failure in its still‑evolving shadow‑banking sector.