Fosun Group, one of the largest private conglomerates in China, is showing more signs of financial woes.

Fosun, a Hong Kong-listed company, is controlled by billionaire Guo Guangchang.

According to Financial Times, Fosun had racked up a debt of $36 billion (260 billion yuan) by the end of 2021 due to a real estate crisis and disrupted supply chains resulting from China’s strict COVID lockdowns.

To ease the unprecedented debt pressure, Fosun is eyeing to make its most significant divestment this year.

The conglomerate said on late October 19 that it planned to sell its 60% stake in the profitable Nanjing Nangang Iron & Steel United Co. Ltd. Fosun has signed a contract to sell the stake to Shagang Group, China’s largest private steel company. 

According to data from Dealogic, the share sale in the steelmaker should bring Fosun’s asset sales to $4.8 billion this year. Last year, the group divested $100 million of assets.

Fosun’s plan to offload its controlling stake in Nanjing Nangang Iron & Steel will require due diligence by authorities.

Radio Free Asia reported that Fosun’s two subsidiaries, Nanjing Nangang Iron & Steel and Fosun International, were suspended from trading in the stock market on October 17.

Several financial and industry insiders expressed no surprise at Fosun’s storm, adding that many large Chinese companies are currently struggling. 

In the first half of 2022, Fosun’s profits plummeted 33% year-on-year to $360 million.

Nikkei Asia reported that the group’s share had fallen around 40% this year.

In late August, the international rating agency Moody’s Investors Service downgraded Fosun’s debt to Ba3 from B1, citing weak liquidity, growing refinancing pressure, and China’s slower economic growth and capital market volatility.

It is worth noting that Fosun is a general agent of Pfizer-BioNTech in China. The two sides have signed an agreement to produce the COVID vaccine in China.

However, though Chinese domestic vaccines proved to be a failure and people’s livelihoods were severely damaged, the Chinese Communist Party imposed a “zero-COVID” policy instead. It also only allows domestic vaccines to be marketed, not foreign vaccines. 

As a result, the share price of Fosun Pharma fell sharply, and its market value has evaporated by two-thirds since the end of last year.

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