The second-largest industrial aluminium extrusion product developer and manufacturer in the world and the largest in Asia, China Zhongwang Holdings Limited prospered in the 2000s along China’s resonating property sector, which created robust demand for its products in construction. In the wake of the economic slowdown, its overexpansion and leveraged asset purchases led to the collapse of its business.
The Shenyang court approved the bankruptcy application filed by Zhongwang's creditors in September 2022. In an official announcement, the company said it had received notice that its 252 affiliates and parent company would undergo consolidated restructuring due to its inability to pay its debts.
As of the end of March, Zhongwang had liabilities of Rmb459.8bn ($64bn) at its affiliates but only Rmb202bn in assets, according to a report by Hong Kong-based auditor Mazars.
As of now, Zhongwang's Hong Kong-listed unit still needs to release its 2021 annual report or first-half report for 2022. In July 2019, its market capitalisation reached an all-time high of HK$30bn (US$3.8bn) but dropped as low as HK$9bn in August 2021 after trading shares were suspended.
Eugene Weng, a Shanghai-based attorney at the firm Wintell & Co., said, "The collapse of Zhongwang was shocking but not surprising to people in the commodity industry. This year's volatility in the global commodity market and the company's poor corporate governance are the straws that broke the camel's back."
Weng added, “The fall of Zhongwang is the failure to crack down on these alleged self-financing activities. Such practices are a ticking time bomb and can hardly be tolerated by Chinese courts."
According to data compiled by Forbes, Zhongwang Holdings helped make its founder the wealthiest man in China’s north-eastern rustbelt province of Liaoning between 2014 and 2017.
Aiming to spur growth, Liu diversified the company's business in 2016, expanding product lines in Tianjin to meet the increasing demand from the aerospace, marine, and vehicle sectors. The company acquired Germany's Aluminiumwerk Unna, a manufacturer of seamless aircraft tubes, in September 2017.
In spite of this, Zhongwang's offshore expansion soon drew the attention of overseas regulators. A planned $1.1bn acquisition of US aluminium maker Aleris was scrapped after the Committee on Foreign Investment in the US raised national security concerns the same year Zhongwang bought the German company.
"However, the bankruptcy has exposed the weaknesses of the conglomerate business model that Zhongwang pursued, and its collapse has hit many contractors and creditors. Liquidating assets could also prove difficult, given manufacturing has been weakened by China’s strict zero-Covid policy," Weng said.
“Everything would have been fine if Zhongwang had kept up its pace of growth and development. However, when the music stopped, Zhongwang was in trouble.”
source https://www.alcircle.com/news/asian-aluminium-extrusion-giant-china-zhongwang-holdings-declared-bankrupt-85972
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