Chinese tycoon Zhang Jin, who owns Fortune Global 500 company, arrested for alleged illegal fundraising worth US$3 billion

Zhang Jin, the billionaire owner of commodities giant Cedar Holdings, has been arrested for illegal fundraising estimated at about 20 billion yuan (US$2.9 billion), according to officials and mainland Chinese media reports.

Police in Guangzhou began an investigation into the illegal absorption of public deposits by Guangdong Yuanfang Investment, a wholly-owned unit of Cedar, and apprehended the main suspect, identified only as Zhang, the city’s Huangpu district public security bureau said in a statement posted on its official WeChat account on Sunday.

An exchange filing by Cedar Development, the Shanghai-listed clothes manufacturer subsidiary of Cedar Holdings, said on Tuesday it could not reach Zhang Jin, the company’s actual controller who owns a stake of almost 70 per cent through indirect holdings. Shanghai Securities News and Sing Tao Daily both reported that Zhang had been detained by the police.

Two calls by the Post to Cedar Holdings, a Fortune Global 500 company, went unanswered during business hours.

The arrest comes as Beijing ramps up efforts to crack down on financial crimes to maintain social stability amid a bumpy recovery from the damage inflicted on the economy by the coronavirus pandemic.

It is one of the most high-profile police investigations into a tycoon since China reopened its economy by scrapping all of its Covid-19 restrictions in November. Revival of economic growth and social stability are at the top of the agenda for policymakers grappling with near-record youth unemployment and a slump in consumption.

Any move seen to harm social harmony and destabilise the financial system is likely to prompt a clampdown from the government.

The Guangzhou police have collected the relevant information and entrusted professional agencies to conduct independent assessments and audits, according to Sunday’s statement. Related assets have been sealed and frozen, it said.

The police urged Cedar employees to assist their investigation and refund any money taken illegally in return for lighter punishments.

Zhang, aged 52 and a native of southern Hunan province, founded Cedar in Guangzhou in 1997 after making a killing from the stock market. He has a bachelor’s degree in economics from Shenzhen University and a master’s degree in management from Hong Kong Polytechnic University.

Cedar runs businesses from commodity supply chains and chemicals to culture, tourism and smart community services. The conglomerate was ranked 359th in Fortune magazine’s Global 500 list in 2021 with revenue of 233.4 billion yuan, according to its website.

Cedar and its units sold over 350 wealth-management products worth more than 20 billion yuan to public investors in the last three years, but they have been unable to make interest payments since 2022, according to local media and the Sing Tai Daily.

Many small investors complained to the government in the hopes of getting back their principals, and the Guangzhou authorities began looking at the business dealings between Cedar and local state-owned enterprises (SOEs), according to financial media outlet Caixin.

Shares of Cedar Development, the apparel maker, dropped 5 per cent to 3.81 yuan in Shanghai on Tuesday, the second day the stock has fallen by that much.

The loss of contact with Zhang had no material impact on the company’s day-to-day operations, according to its exchange filing. Zhang’s 372 million shares in the listed company, amounting to a 68.5 per cent stake, have been frozen by the court, it said.