Zhengzhou Coal Mining Machinery Group Co., Ltd. (Zheng Coal Machinery) recently announced that their purchase of financial products worth 300 million yuan has resulted in a return of less than 30 million yuan upon maturity, posing a risk of not being able to fully redeem the principal and interest. This news made it to Baidu’s hot search on June 3rd.
According to the announcement titled “Announcement of Zhengzhou Coal Mining Machinery Group Co., Ltd. on the Redemption of Trust Financial Products at Maturity” released by Zheng Coal Machinery on May 31st, in May 2023, the company signed contracts with Foreign Trade Trust for three financial products – “Foreign Trade Trust · Huasoft New Power Select No.1 Single Fund Trust Contract,” “Foreign Trade Trust · Huasoft New Power Select No.2 Single Fund Trust Contract,” and “Foreign Trade Trust · Huasoft New Power Select No.3 Single Fund Trust Contract.” They subscribed to these products with their own funds totaling 300 million yuan, with a maturity period of 12 months and an expected annual return rate of 5.00%. As of May 30th and 31st, 2024, despite issuing instructions to redeem the trust property shares upon maturity, only a total of 29.5634 million yuan has been received so far, with uncertainty remaining on the recovery of the remaining amount, posing a risk of not being able to fully redeem the principal and interest.
In November 2023, Zheng Coal Machinery was involved in the “Hangzhou 3 billion yuan Quantitative Private Placement Runaway” incident, where several listed companies were affected.
Zheng Coal Machinery had previously invested billions in financial products. According to an announcement on March 29th this year regarding the use of idle funds for financial management, they planned to use up to 7 billion yuan of their idle funds to purchase financial products within 12 months.
In March 2023, Zheng Coal Machinery also released a similar announcement, with a financial limit of 7 billion yuan. The announcement also disclosed their recent 12-month use of own funds for entrusted financial management, showing that by the end of March last year, Zheng Coal Machinery had spent a total of 11.2 billion yuan on entrusted financial management.
In 2022 and 2021, Zheng Coal Machinery announced financial limits of 5 billion yuan.
Yang Delong, Chief Economist of Qianhai Kaiyuan, told “Hai Xia Urban Daily” that funds raised by listed companies should be used in their main business. If a large amount is used for investing in financial products, it not only gives the impression of straying from the core business but also affects their operational stability and competitiveness.
Renowned economist Song Qinghui also mentioned that there is nothing wrong with listed companies purchasing financial products as long as it complies with regulations. However, the underlying assets of the chosen products should be solid, risk management should be adequate, and caution should be taken on the safety of idle funds used for financial products by listed companies to prevent speculative activities.
In response, a netizen named “DingDingDoesNotHaveACold” expressed surprise, noting that the fund recovery is even less than 10%.
Meanwhile, “EducationReceivedDoesNotAllowThis” questioned, “How can the risk control department of a state-owned enterprise allow such risky investments?”
“SniffSniffInterpretsAlone” lamented, “Is there any sense of security in financial products? It’s too frightening.”
Public records show that Zheng Coal Machinery was established in 1958, and in 1998, it was transferred from the Ministry of Coal Industry to Henan Province, being a state-owned enterprise.