The latest chapter in the Chinese debt crisis: what happens to Hywin Holdings

Hywin Wealth Management, a Chinese distributor of real estate wealth management products, said it is reselling its outstanding assets and will provide detailed resolution plans to all investors by the end of the month.
The announcement came following the Shanghai-based company's failure to pay for some investment products distributed at a time of crisis in the Chinese real estate sector.
No details have been leaked regarding the figures at stake.
Hywin, whose products are mostly invested in real estate, had announced in recent days that it had not been able to satisfy customers' refund requests.
He then set up a special task force to come up with a treatment plan in a race against time.
Meanwhile, shares of Hywin Holdings, its parent company listed on the Nasdaq, in the United States, fell by almost 60%.
The latter, to reassure investors, stated that its projects “have been delayed due to a declining economy”, and that a special investigative committee was established to “proactively coordinate stakeholders in planning solutions ”.
read also Prices too low: China's latest problem is called deflation What's happening in China: spotlight on Hywin Wealth Management Hywin Holdings began operating in late 2006 through Hywin Wealth Management.
Over the years, its website says, the company has provided asset allocation and wealth management services to more than 146,000 high-net-worth individuals and institutions.
Specifically, Hywin Wealth has more than 2,500 employees and offers wealth management and advisory services.
It is a relatively small player in China's $3 trillion shadow banking sector.
The company, which had ties to real estate developer China Evergrande Group, had $1.2 billion in assets under management and reported total assets of $328 million as of June 2023, according to a filing with the U.S.
Securities and Exchange Commission.
“In accordance with the latest regulatory policy and industry guidance, Hywin Wealth has volunteered to retire and resolve our existing assets.
We will inform everyone about the relevant solutions by the end of the month and we hope that people will refrain from believing and spreading rumors,” reads a statement issued by the group on December 17.
read also Economy and national security: what Xi's purges reveal The links between the real estate sector and asset management A hypothetical default of Hywin Wealth should not have the same consequences as other previously failed asset management companies, such as Zhongzhi.
This, however, demonstrates a key aspect of the economic crisis that has hit China: the intertwining, much deeper than one could have imagined, between the aforementioned Chinese asset management industry and the real estate sector.
Not surprisingly, a company prospectus describes Hywin Holdings as one of China's largest third-party asset management companies, as well as the country's leading provider of real estate-related fixed income products.
Hywin Holdings products used to primarily finance real estate projects developed by Evergrande, Sunac and other large developers, with maturities ranging from six months to three years.
The company's announcement, therefore, triggered new worries among Chinese investors, already shaken last month by shadow banking giant Zhongzhi Enterprise Group, which had warned of a serious insolvency after one of its trustee affiliates failed to make payments on high-performance products.
A subsequent criminal investigation into the firm, which had used families' savings to invest in multiple areas – including real estate – could now potentially inflict tens of billions of dollars in losses on those same investors.
The Hywin grain, therefore, is yet another flashing light that has appeared in a dashboard (read: Chinese economic system) that needs to be fine-tuned.