Founder of Chinese developer Zhenro faces action on ‘suspected illegal activities’

The founder of Shanghai-based developer Zhenro Properties Group has been placed under legal compulsory measures, as the debt-laden home builders continue to struggle through the country’s long-running property-market crisis.

Zhenro’s actual controller, Ou Zongrong, is facing legal compulsory actions “due to suspected illegal activities”, the developer’s holding company said on Monday. It noted that “Ou does not currently hold any positions such as director, supervisor or senior executive at the company”.

The announcement came just days after Ou Guowei, the son of Ou Zongrong, tendered his resignation as the developer’s non-executive director and member of the audit committee. Before that, on January 2, the developer said a restructuring support agreement had expired when its final deadline passed on December 31.

The company defaulted in 2022, a little over a year after Chinese authorities implemented a nationwide deleveraging campaign to rein in debt in the country’s property sector

. As of end June 2024, Zhenro had total liabilities of 123.4 billion yuan (US$16.9 billion), according to its interim report.

China Vanke, another cash-strapped developer backed by the Shenzhen government, saw its CEO detained by the police last Thursday, according to state media reports. The developer faces US$4.9 billion in onshore and offshore bonds

that are maturing or facing redemption options this year, and the Shenzhen government is in talks to stabilise its operations, Bloomberg reported on Monday.

Other Chinese developers are also confronting challenges, with Sunac, Shimao

among the builders facing new liquidation petitions and court hearings in January. Country Garden’s liquidation petition hearing was adjourned to May 26

on Monday in Hong Kong after the developer unveiled a proposal earlier this month to restructure as much as US$11.6 billion in liabilities.