Photo/Shetuwang

June 5 (NBD) -- Zhejiang Xinhu Group Co., Ltd. ("Xinhu Group") and its subsidiaries are shifting their focus from the financial sector to the burgeoning fintech area, according to 21st Century Business Herald. 

In late May, the real estate developer's subsidiary Xinhu Zhongbao Co., Ltd. ("Xinhu Zhongbao", 600208.SH) announced its plan to invest 1.23 billion yuan (191.7 million U.S. dollars) in a blockchain tech company. Shortly after the announcement, the listed company received the inquiry letter from the Shanghai Stock Exchange.

In the internet domain, companies within Xinhu Group's ecosystem not only played a part in the privatization of 360 Security Technology Inc. (601360.SH) and its return to the Chinese A-share market, but also invested in a number of internet financial information service companies like Shanghai DZH Ltd (601519.SH), Wind Information Co., Ltd. and Bangsun Technology. 

Before the push into the fintech sector, they were active in the fields such as securities, banking, insurance, and futures. 

However, potential risks relating to the business model that combines real estate with finance are emerging. 

Data shows Xinhu Zhongbao reaped around 3.3 billion yuan (517.8 million U.S. dollars) in net profits last year. Of those, income from investment was about 3.2 billion yuan (496.0 million U.S. dollars). The subsidiary's daily business including real estate only generated 139 million yuan (21.7 million U.S. dollars) in net profit attributed to parent company's shareholders. 

Tight scrutiny is likely another challenge facing Xinhu Group and its subsidiaries. 

According to the Interim Measures for the Equity Management of Commercial Banks, which has come into force as of January 5, a single investor, its related parties and the person acting in concert are allowed to invest as a major shareholder in no more than two commercial banks and to hold a controlling stake of no more than one commercial bank.  

Xinhu Group and its subsidiaries, however, has invested in Bank of Wenzhou Co., Ltd., China CITIC Bank Corporation Limited (601998.SH), and Shengjing Bank Co., Ltd. 

Moreover, the Provisions on Administration of Equity of Securities Companies (Consultation Draft) stipulates that the controlling shareholder of securities companies shall have net assets worth no less than 100 billion yuan (15.6 billion U.S. dollars). 

Xinhu Zhongbao, as the controlling stakeholder of Xiangcai Securities Co., Ltd., only possessed net assets worth 32.2 billion yuan (5.0 billion U.S. dollars) last year.

Email: lansuying@nbd.com.cn