More Local Financial Asset Exchanges Cease Operation Amid Sweeping Cleanup

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Among all 28, only the one in Beijing is to be restructured and rebranded

Authorities across China are ramping up the closure of local financial asset exchanges (地方金融资产交易所) in a sweeping crackdown on financial risks and illegal fundraising.

Financial regulators in central China’s Henan province Friday revoked the business license of Zhongyuan Financial Asset Exchange Co. Ltd., one of more than a dozen local authorities to have shut down such institutions citing the risk of “pseudo-financial exchanges.”

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China is shutting down local financial asset exchanges to address financial risks and illegal fundraising.
Henan's Zhongyuan Financial Asset Exchange, funded by state-owned enterprises and established in 2019, had its license revoked.
Since late March, 16 exchanges have been closed, with plans to shut down all but Beijing's exchange within a year.

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Who’s Who

Zhongyuan Financial Asset Exchange Co. Ltd.: Zhongyuan Financial Asset Exchange Co. Ltd., based in Henan province, was funded by Zhongyuan Asset Management and Henan Daily Newspaper Group with a registered capital of 200 million yuan ($27.5 million). It focused on bad asset disposal and equity investment, starting operations in January 2019. Its business license was revoked in a recent crackdown on pseudo-financial exchanges.

Zhongyuan Asset Management Co. Ltd.: Zhongyuan Asset Management Co. Ltd. is a provincial government-owned company that funded Zhongyuan Financial Asset Exchange Co. Ltd. It has been involved in the management and disposal of bad assets and equity investment. The company had a role in the operations of the Zhongyuan Financial Asset Exchange, which started in January 2019 but was shut down by Henan province authorities amid a crackdown on financial risks and illegal fundraising.

Henan Daily Newspaper Group Co. Ltd.: Henan Daily Newspaper Group Co. Ltd. is a provincial government-owned entity that co-funded Zhongyuan Financial Asset Exchange Co. Ltd. along with Zhongyuan Asset Management Co. Ltd. The exchange, which focused on bad asset disposal and equity investment, started operations in January 2019 but had its business license revoked by Henan authorities in the recent crackdown on financial risks and illegal fundraising.

China Evergrande Group: China Evergrande Group is an indebted conglomerate that has used local financial asset exchanges as important funding channels. These exchanges, which have been subject to insufficient oversight and frequent illegal fundraising, are part of a broader issue that led to regulatory crackdowns and closures.

Zhongzhi Enterprise Group Co. Ltd.: Zhongzhi Enterprise Group Co. Ltd. is identified in the article as one of the indebted conglomerates that benefited from the financial asset exchanges before their closure. These exchanges served as important funding channels, facilitating illegal financing activities in which Zhongzhi was involved alongside other large enterprises such as China Evergrande Group and Tomorrow Holding Co. Ltd.

Tomorrow Holding Co. Ltd.: Tomorrow Holding Co. Ltd. is one of the indebted conglomerates that utilized local financial asset exchanges for funding. The company's involvement underscores the problematic nature of these exchanges, which often facilitated illegal financing activities.

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What Happened When

2010：: China created its first local financial asset exchanges in Tianjin and Beijing.

Since 2011：: Several crackdowns on financial asset trading venues began.

2020：: The number of financial asset exchanges peaked at 74.

November 2021：: Regulators banned any new financial asset exchanges and mandated integration so each province only had one exchange at most.

Late 2023：: Several central government ministries issued a decision to close down local financial asset exchanges. Among all 28, only the one in Beijing is to be restructured and rebranded.

Late March 2024：: China's crackdown on risky operations escalated; four local financial asset exchanges in Hunan, Liaoning, Xi'an, and Chongqing were closed.