China has put an executive at China Great Wall Asset Management under official investigation on suspicion of corruption, the latest scandal in the country’s distressed-asset management industry, Bloomberg reports.

Hu Xiaogang, a vice president at Beijing-based Great Wall, is being investigated on suspicion of “severe disciplinary and law violation,” according to a statement by the Communist Party’s anti-corruption watchdog, the Central Commission for Discipline Inspection.

The statement only referred to Hu, 57, as a former vice president at China Orient Asset Management, another of the bad debt managers, which he left in 2018 after almost 20 years at the firm.

The companies are among China’s four major state-run distressed-loan managers that also include China Huarong Asset Management and China Cinda Asset Management.

The investigation comes amid increasing concerns among investors over the financial health of Huarong, whose former chairman Lai Xiaomin was executed in January for crimes including bribery, and its peers.

Huarong has continued to repay its bonds and said it has seen no change in support from China’s government. But its offshore and onshore bonds have come under pressure in a selloff that has spread to peers amid questions about government support for the industry. None of the four bad-loan managers has tapped the offshore bond market since Huarong shocked investors by failing to publish its financial results at the end of March.

China created its asset management firms in the aftermath of the Asian financial crisis, when decades of government-directed lending to state firms had left the biggest banks on the brink of insolvency. They have since expanded beyond their original mandate, creating a labyrinth of subsidiaries to engage in other financial businesses and borrow billions from the bond market.

The bad-loan managers have combined liabilities of about 4.5 trillion yuan (US$703 billion), including US$49 billion of outstanding dollar bonds, according to their latest financial statements and data compiled by Bloomberg. The firms need to refinance or repay US$4.9 billion of maturing dollar notes through year-end.

Hu is the most senior executive of China’s bad-debt industry to be probed after the downfall of Lai. A biography attached to CCDI statement, also identified him as a former member of Great Wall’s Communist Party committee. Great Wall’s website doesn’t show him as a member of the firm’s leadership.

Hu Xiaogang, a vice president at Beijing-based Great Wall, is being investigated on suspicion of 'severe disciplinary and law violation.'

China Great Wall Asset Management exec Hu Xiaogang investigated for corruption