In Depth: Why China’s Regulators Are Taking On Local Governments Over Their Financial Asset Exchanges

By Zhang Yuzhe, Wang Jing and Kelsey Cheng

Local trading platforms have emerged as a new risk to financial stability in China, with many degenerating into illegal financing channels for real estate companies and LGFVs. Photo: VCG

As infamous corporate raider Shenzhen Baoneng Investment Group Co. Ltd. searched for ways to fund its ultimately doomed expansion into finance, property and new-energy vehicles, its own employees were encouraged to invest.

The group, which collapsed last year under a 200 billion yuan ($31 billion) mountain of debt, set up a platform on its internal network called “Employees Win.” Clicking on the icon gave staff direct access to five local financial asset exchanges (FAEs) (地方金融资产交易所) across the country where they could buy wealth management products (WMPs) issued by Baoneng-linked companies.

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