Personal Note: Layered investment products, underlying assets that ordinary investors can’t understand; those behind it know they won’t cheat the poor, but will relentlessly exploit the poor, and are likely to accept cheating the middle class.
It’s December 2025, and a large number of investors in Zhejiang Province are still blocking doors to seek redress due to investment losses – this event has been particularly hot in the financial investment field, and we can find several keywords: state-owned background, low yields, civil servant/teacher as investment subjects (minimum purchase of 200,000 RMB, KYC of 400,000 RMB), etc. This proves that no matter how sophisticated a financial tool is or how strong its backing, which groups are buying it has evolved into an “othering” risk. If you only see these keywords, it means your understanding of the full picture is still too shallow. There’s a lot to dig into regarding this actual loss – it’s worth investigating deeply.
Borrowing from Yourself and Securing Financing with Receivables
The financing, collateralized, and issuing platforms are interconnected entities within the “Xiangyuan” system – a group of companies that can be understood as essentially borrowing money from oneself. Subsequently, through controlled state-owned financial platforms, receivables are used as collateral to access market financing, further increasing leverage—and it’s all self-dealing. The sole objective is to inject fresh blood from the outside. As the saying goes, “If all witnesses, circumstantial evidence, and sponsoring/cooperating entities are my people, how can I argue with them?”
Regarding the AA+ credit rating presented to investors, it appears more impressive than some sovereign debt ratings of entire economies, a solid investment-grade financial rating. However, when compared closely, it’s no match for the credibility of Evergrande and Greentown Property before their defaults; even AAA ratings carry significant weight. Furthermore, like Wanke, which survived after the cessation of support from Sino-Iron Group, continues to maintain an AAA credit rating despite ongoing assessments by domestic rating agencies in China, demonstrates a blatant disregard for personal credit.
Such a shockingly flawed product was able to successfully issue to investors, with seamless access at every stage and a high credit rating. Are the issuing institutions fools? Not really; this involves the second distribution of profits.
Extremely High Intermediation Costs
If any bizarre operations occur in the financial sector, the true interest allocation relationships are often hidden behind empty rhetoric. Investors only receive 4% returns, while the issuer’s overall financing costs reach 8-9%, and the 4-5% commission in between is a share of profits across various stages of issuance – extremely exaggerated. This is a fundamental characteristic of instability within the financial system: interests take precedence over business capabilities, and everyone shares in investor money.
This is why investors see low interest rates as a source and, considering risk-free returns of around 2.5% in 2023 and 2024, the risk premium is only 1.5%, compounded by state-owned enterprise (SOE) backing – it’s not really considered a high-risk asset unless you study the underlying assets and equity structures. Instead, this low return has become the primary reason for being exploited, as 6%, 8%, or 10% returns are difficult to achieve given the risks seen in concentrated defaults in previous years, which has led investors to be wary of high-yield investments. Now, low returns aren’t low risk; it’s simply due to excessively high intermediary commissions. For the actual enterprise end, willing to offer 8-9% as financing costs isn’t a generous act – it’s purely for investor principal.
This risk is incomprehensible to outsiders, but does SOE shareholders not understand it? Don’t underestimate the ability of these people to seek profit and avoid loss. What happens if there’s a default? Of course, they quietly exit before the default occurs.
State-Owned Enterprise Shell Game
This is the third magical aspect. Equity changes were quietly executed, and there was no sufficient risk disclosure or notification provided to investors. When buying, it was backed by state ownership; when maturity arrived, it turned out to be a private enterprise. The result was that everyone saw clarifying statements, vehement denials of any connection, and investors were left bewildered. Aside from the nearly empty shell, there was hardly anyone in charge.
Previously known as the Zhejiang Financial Asset Trading Center, a place with clear gold exchange characteristics, after the one-page document canceled the Zhejiang Jin center’s financial license last November, it was renamed Zhejiang Zhijin Asset Operation Co., Ltd. this year and truly implemented a normal investment institution without official backing. Although it cannot issue new wealth management products, it must bear absolute redemption obligations for the preceding products, and it has early-planned exits – essentially playing a clever “golden cicada shedding its skin.” Only investors were caught in the trap of state ownership backing.
Real Estate Downturn Cycle and Risk Spillover
Regarding whether it’s finance or the risk spillover from real estate, China’s financial system, including banks, has benefited too much from profits in real estate over the past decade. It was easy to make money with a 10% funding cost – as long as you could secure projects and quickly turn over sales, property developers didn’t care about costs. However, during a real estate downturn cycle, property developers go bankrupt one after another, and the true risk spillover is that you simply don’t know how much of the underlying assets in the financial products you hold are related to real estate investments. It’s like patching up one wall with another, ultimately leading to collapse.
For example, direct defaults by homebuyers, defaults by high-net-worth group trusts, and even financial products issued directly by these property developers – whenever the underlying assets are related to real estate investment, they either default outright or evolve into a “parasite” situation, relying on debt to sustain themselves until their liquidity runs out, at which point they inevitably collapse. It’s simply a matter of who is the last link in the chain of drumming – for example, ZJCC Securities’ main products are almost entirely based on Shaanxi Xiangyuan Group’s real estate projects, with this proportion reaching over 90% after 2023. Or, it involves debt transactions between related companies. The core issue is that houses aren’t selling, and there isn’t new blood coming in. These assets weren’t the first to collapse, and they certainly won’t be the last.
Why Did State-Owned Assets Fall into the Trap?
Let’s dig deeper – why did the wealth management products behind Zhejiang Jinrong Center still meticulously select specific wealth size groups, namely only open to members, and idle funds were also above 200k-400k? This demographic perfectly overlaps with local civil servants and teachers – a truly ridiculous spectacle backed by state-owned assets, deceiving both locals and Chinese people. What allowed a regional gold exchange center to become a financing tool for Xiangyuan Group, akin to the absurdity of Evergrande and Shengjing Bank, requires further investigation.
This leads us back to the 2018 breach by Huaxin Group, which itself is a much larger financial story involving defaulted products exceeding one trillion yuan. While our financial system lags behind, we certainly aren’t lacking in this ability to innovate financially and make money. Of course, we’re focusing solely on the 3.7 billion defaulted products related to Zhejiang Jinrong Center – a pot that can’t be easily discarded; it was almost entirely state-owned. And precisely because of this risk loss, Zhejiang Jinrong Center urgently sought high-yield assets and capital supplementation, leading to important connections with Xiangyuan Group, after all, we couldn’t rely on the current real estate market fervor to disprove the fact that Zhejiang Jinrong Center’s decision-makers, at the time, were eager to invest in highly sought-after property giants.
For example, Shunfu Steel Group’s 6 billion investment in Vanke – others could only get on this line by investing money; in 2018, real estate was still at its peak. Zhejiang Jinrong Center didn’t spend any money and, instead, injected 120 million yuan into the stockholding enterprise in 2019, engaging in transactions with demons, laying the groundwork for future loss of control. When you encounter a small problem and want to put a larger lid on it, that’s often the first step towards losing control – because of the 3.7 billion default, introducing property giants and pursuing seemingly high-yield projects, Zhejiang Jinrong Center was gradually led into the abyss. It’s also worth admiring the level of the referee; they already successfully shed their skin. Regarding the banner of Zhejiang Jinrong Center being canceled in November last year – it has no bearing now, forming a perfect closed loop with the opening of the article. As for pursuing legal recourse, wait and see!
Concluding Remarks:
Market returns themselves are not constant. You shouldn’t use past average returns as a reference for current risk; for example, the risk-free yield suggestions for the previous few years’ columns were around 3% for large savings bonds, while now it can only provide 1.5%. And future judgments will be more complex – low yields don’t necessarily mean low risk, just like the packaging of these defaulted products. The combination of “ordinary people + investment” in this cyclical environment is better to focus on risk and principal rather than returns; absolutely do not blindly gamble. Pay attention to underlying assets, genuine credit backing, diversify investments, even if you think you have earlier information and stable redemption guarantees within the system – don’t forget to prioritize basic living expenses and future fixed-cost savings in low-yield, low-risk or almost risk-free places; losing is better than winning. Tiered allocation and diversified allocation are the only choices for ordinary people in this environment.