A key Chinese shadow bank has missed payments on dozens of investments, and it shows just how bad things are in the world's second-largest economy

• Zhongrong, a Chinese trust company, missed payments on dozens of investment products, per Bloomberg.
• The missed payments came days just after property giant Country Garden missed coupon payments.

Chinese trust company Zhongrong International has missed repayments on dozens of investment products since late July — pointing to deepening troubles in the world's second-largest economy amid a real-estate crisis.

Wang Qiang, the company's chief compliance officer, told investors earlier this week that the company — a part of China's shadow banking sector — had missed payments on at least 30 products, Bloomberg reported Wednesday, citing unnamed people familiar with the matter.

Zhongrong is the ninth largest trust in China, with 600 billion Chinese yuan, or $82 billion, worth of assets under management.

Wang said Zhongrong doesn't have immediate plans to make the payments because it has short-term liquidity issues, per Bloomberg.

The meeting took place after two Shanghai-listed companies said in exchange filings over the weekend that they did not receive payments from Zhongrong that were due last week.

These alarming troubles at Zhongrong come just days after Country Garden, China's biggest private-sector developer by sales, missed interest payments on two US-dollar-denominated bonds.

Both events are concerning because China's trust companies sell investment or trust products to corporate and wealthy clients. The clients' funds are then pooled and invested in a wide range of products or used as loans to private companies — including real-estate developers.

As of the end of 2022, China's trust sector's exposure to real estate was about 2.2 trillion yuan, or $302 billion, accounting for 10% of its total assets, per Bloomberg Economics.

"The latest wave of defaults from wealth management firms on trust-related products is likely to cause some substantial ripple effects for the broader economy through wealth effects," Nomura analysts wrote in a Monday note seen by Insider.

As the client base of such wealth management firms is skewed to those in the upper-middle to the ultra-high net worth range, the defaults — or even just concerns caused by delayed payments — could further dampen consumer confidence in a group with much greater spending power than the national average, the analysts wrote.

Zhongrong did not immediately respond to a request from Insider for comment.