Country Garden and Zhongrong are the latest casualties in the mainland’s debt and market crisis. But what do we really know? The continued lack of transparency just risks making the country uninvestable. 

At least there is nothing all that new here. Since the Evergrande crisis reared its head a couple of years back, we have been writing that when it comes to China’s financial markets – silence is not very golden.

Take Zhongrong. As finews.asia reported both on Monday and Tuesday, the only reason we even know anything was because we learned about it the wrong way around – from clients and not the company itself. 

One of the clients was KBC, a carbon products manufacturer mentioned in our reporting, which was likely required to disclose materially important information. In this case, it was that Zhongrong had missed payments for wealth management products sold to KBC.

Acrobatic Exercise

For the hypothetical international investor, finding that out takes a bunch of web acrobatics. First, they are likely to go to the Shanghai Exchange page and try to find some information - but there is nothing there related to the company’s name. They might then do a bit of research and go back to the original exchange search engine after finding what is ostensibly the company’s share code, 688598, although if they would do that they would still get a big fat nada.

After that, the hapless investor might return to the company’s page and finds the actual announcement in Chinese by using Google Translate. Then, finally, something that might be the headline for the announcement in question («Jinbo shares’ reminder announcement on overdue redemption of trust products», published on 12 August) but they don’t know as they can’t easily translate the underlying PDF file.

They might also Google anything related to Zhongrong and find a couple of companies that they could potentially be. But there is one thing they all have in common. All the places specifying company news on their websites are empty shells without information.

Direct Recourse

In practice, of course, the example above relates only to institutional investors that qualify under the QFII scheme and it is likely, we would hope, that they would have direct recourse, or at least a contact, to their investment. Even so, is this all good practice?

Country Garden, one of China’s largest property developers, and the current poster boy for the real estate crisis is another example - although admittedly it makes a better showing of things. 

At least we can piece together what is going on in a message sent to the Hong Kong Stock Exchange on Saturday when markets were closed.

Bond Suspension

From it, we are given to understand that they intend to hold a meeting with bondholders related to the redemption of their corporate bonds and that trading of certain tranches of non-public bonds was being suspended from Monday on.

They also did admit to being in a precarious financial situation after issuing a profit warning last week but that the company was doing its utmost to manage the current situation.

«The Company will conduct full communication with bondholders and conscientiously perform information disclosure obligations in strict accordance with the requirements of relevant laws and regulations. Again, the Company expresses gratitude to all investors for their continued care and assistance,» it indicated.

Redemption or Not

There is no detail about coupon repayments, which is only hinted at the outset when indicating the meeting it intended to hold.

Only by rereading it would they get the gist of what truly matters – the overall safety of the property market, which it considers its most important corporate responsibility. 

That is all fine and good - except when you have taken money from international investors in the first place.

Generic Termsheet

Still, they are left, unconsoled, with a rather discomfiting «investors are advised to pay attention to investment risks» as if they were innocent retail clients perusing a generic mutual fund brochure term sheet.

This is all likely why investors from abroad may be starting to lose faith in the markets in China. 

You might get away with it all when markets are going up but if you clam up and are not forthright, and detailed, when things turn sour, the bears start to walk all over you.