In late November 2025, debt-related products distributed through the Zhejiang Financial Assets Exchange Center entered default. More than 15,000 onshore investors were affected, impacting approximately 25,000 households, with total exposure estimated at around RMB 24.2 billion (US$3.5 billion).
The case has drawn attention not because of the novelty of financial distress, but because it involves a provincial-level financial asset exchange that for years had been positioned as part of Zhejiang’s official financial infrastructure.
More than a month after the payment failure, no formal or publicly disclosed resolution framework had been released. Responsibility for handling the situation appeared to shift between the platform and relevant authorities, while investors received fragmented information through informal channels.
Investor expectations shaped by official positioningThe Zhejiang Financial Assets Exchange Center was established on October 29, 2013, with formal approval from the Zhejiang provincial government.
At the time of its establishment, the platform was fully state-owned, with government-affiliated entities holding 100% of its equity. During its founding and expansion stages, state-owned capital functioned as the primary bearer of institutional credibility.
From its inception, the platform was positioned as an official financing venue within Zhejiang’s public financial framework. Government-issued documents explicitly endorsed its establishment, and the platform played roles in supporting public initiatives such as environmental programs, local infrastructure development and the financing needs of local government-linked entities.
It was integrated into public-facing systems, including citizen card services, and promoted through offline channels associated with government institutions.
Through these arrangements, the Zhejiang Financial Assets Exchange Center was consistently presented to the public as an “official” platform operating within the province’s public credit domain. This long-term positioning, reinforced by formal government approval and state ownership during its formative years, shaped investor perceptions of the platform’s credibility.
Against this background, many creditors committed core household assets originally intended for retirement, education or housing into products distributed through the platform. In addition to the platform’s official positioning, the AA+ credit ratings assigned to its products further reinforced confidence, despite limited transparency regarding underlying risks.
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Default and legacy exposureOn November 28, 2025, withdrawal and transfer functions on the platform were suspended. For an extended period, investors reported receiving no written explanation regarding repayment mechanisms, legal procedures or timelines.
Developments occurred in early January 2026. As of January 6, account balances became technically withdrawable within the system. On January 8, approximately 5% of principal was returned to creditors, with funds transferred directly to their registered bank accounts.
Neither development was communicated through formal or public announcements. Instead, information circulated through nonofficial channels, including one-on-one community assistance. No comprehensive repayment plan or standardized resolution framework accompanied these actions, leaving investors uncertain about how remaining obligations would be addressed.
In addition, investors seeking to pursue formal legal or regulatory avenues reported experiencing restrictions and pressure. These actions contributed to further uncertainty regarding available legal or procedural remedies and heightened creditor anxiety.
The risks underlying the Zhejiang case did not emerge abruptly. Available materials indicate that part of the exposure originated from earlier unresolved credit events, including the Huaxin incident. Obligations associated with those events were not fully resolved but were carried forward into subsequent product structures distributed through the platform.
Over time, historical risk accumulated within later issuances. When liquidity conditions tightened, these vulnerabilities surfaced simultaneously. The default therefore reflected not only short-term stress but also the delayed consequences of unresolved legacy exposure embedded in later products.
Despite the accumulation of underlying risks, the platform continued to distribute debt-related products. Information regarding risk concentration, qualification changes and product structure was not disclosed in a timely or prominent manner. Transfer functions remained accessible until shortly before the default.
These practices created a pronounced information asymmetry between the platform and its investors. While the platform retained knowledge of internal risks and regulatory developments, creditors lacked the information necessary to reassess exposure or make informed decisions as conditions changed.
Regulatory oversight and enforcement failuresRegulatory responsibility is a central issue in the Zhejiang case. Since 2017, Zhejiang’s provincial financial authorities have issued a series of regulatory documents governing financial asset exchanges.
These regulations established clear requirements, including preventing risk accumulation, clearing personal investor exposure, restricting nonstandard financing, prohibiting improper cross-regional operations and closing noncompliant platforms within defined timeframes.
Despite these clearly articulated obligations, the Zhejiang Financial Assets Exchange Center continued to expand its personal investor business over several years. According to figures cited by investors, products linked to the Xiangyuan Group grew from approximately RMB 5.2 billion in 2020 to around RMB 25 billion by 2025, while the number of individual investors increased from several thousand to more than 15,000.
In October 2024, the provincial financial authority announced the cancellation of the platform’s financial asset trading qualification. However, investors state that this decision was not disclosed to them in a clear or timely manner.
No standardized exit arrangements were introduced for existing products, and transfer functions reportedly remained accessible, allowing investors to continue transactions without knowledge of the qualification withdrawal.
Additional warning signals emerged in 2025, including audit findings related to product irregularities that were transferred to relevant departments. According to investor materials, no comprehensive risk review, suspension of product issuance or public risk disclosure followed before the crisis erupted.
Following the default, regulatory handling has focused primarily on containment. Investors report a lack of transparency regarding task force composition, asset verification and data protection measures, alongside inconsistent communication.
Requests raised by creditors—such as securing platform systems, investigating related-party fund movements and clarifying shareholder responsibilities—have not received formal responses.
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Taken together, these facts indicate that regulatory requirements that existed on paper were not effectively implemented in practice. The absence of enforcement at multiple critical stages allowed risks to accumulate and expand into a large-scale investor crisis.
A test of governanceThe Zhejiang case offers clear warnings for both platform operators and regulators overseeing state-linked financial institutions.
For platforms operating under government-linked frameworks, institutional credibility cannot substitute for compliance. When products are distributed to individual investors committing core household assets, operators bear heightened responsibilities: to disclose risks accurately, halt transfers when qualifications change and ensure that unresolved historical exposures are not carried forward.
Failure to meet these obligations turns public credibility into a source of misrepresentation rather than stability.
For regulators, authority rests not only in issuing rules but in enforcing them consistently and communicating transparently. In this case, clearly defined supervisory requirements existed for years yet were not effectively applied at key moments. The absence of timely disclosure, standardized exit mechanisms and visible enforcement undermined confidence long before the default occurred.
When a default arises on a state-linked platform, the consequences extend beyond financial loss. Public trust in regulatory institutions becomes part of what is at stake. Crisis management that avoids accountability or prioritizes containment over clarity risks deepening that loss of confidence rather than restoring it.
The Zhejiang case is therefore not merely a product failure. It is a test of governance—of how platforms operate under public credibility and of how regulators uphold their responsibilities when that credibility is placed at risk.
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