BEIJING (Reuters) – Faced with a liquidity crisis, Zhongzhi Enterprise will restructure its debt, the Chinese asset manager told investors on Wednesday, as the worsening slowdown in the property sector raised fears of contagion risks to the entire financial sector.

Zhongzhi, headquartered in Beijing and heavily exposed to real estate, has stopped paying coupons on all of its investment products, its management told investors at a meeting on Wednesday, according to a report. video seen by Reuters.

Asset managers like Zhongzhi raise hundreds of billions of dollars by selling high-yield investment products linked to shadow banking through trust and wealth management subsidiaries, like Zhongrong, and maintain close links with banks and the rest of the financial sector.

A series of failures in China’s shadow banking sector, which weighs 2.750 billion euros, could weigh on the whole economy, as many individual and institutional investors are exposed to fiduciary products.

Zhongzhi has hired one of the top auditing firms to carry out a comprehensive audit and is looking for strategic investors, its management told investors at Wednesday’s meeting.

The group is planning a “self-rescue” through restructuring, promoting debt collection and liquidation of its assets, but bankruptcy is also an option, he added, without disclosing the amount of the debt that needs to be restructured.

It was not possible to determine whether the company was insolvent until the completion of audit work, which began in July, executives told investors, according to video seen by Reuters.

Zhongzhi, who according to Chinese media manages more than 1 trillion yuan (125.79 billion euros) in assets, did not immediately respond to a request for comment.

(Reporting Jason Xue in Shanghai, Clare Jim in Hong Kong; with input from the Shanghai office, writing by SumeetChatterjee, Corentin Chapron, editing by Kate Entringer)

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