A recent announcement has revealed a financial loan dispute between Huaxia Bank and a Shenzhen state-owned enterprise, involving an amount of 1.513 billion yuan. This case may be related to the lingering effects of the bailout of China South City.
Shenzhen State-Owned Enterprise Pursued by Bank for Over 1.5 Billion Yuan According to a significant matter announcement disclosed by Shenzhen Special Zone Construction and Development Group Co., Ltd. (hereinafter referred to as Special Zone Construction and Development Group) on May 7th, on April 2nd, 2026, the company received litigation materials such as a statement of claim and a notice to respond to the lawsuit served by the Shenzhen Intermediate People's Court. The court has accepted and registered the case filed by Huaxia Bank Shenzhen Branch against Shenzhen Shenji No.1 Industrial Park Investment and Operation Co., Ltd., South China International Industrial Materials City (Shenzhen) Co., Ltd., Xi'an South China City Co., Ltd., and Special Zone Construction and Development Group regarding a financial loan contract dispute, with the claim amount being 1.513 billion yuan.
As of the announcement disclosure date, the court hearing time for the aforementioned case has not yet been determined. Special Zone Construction and Development Group stated that the company's production and operations are normal and that it will actively organize its defense in accordance with laws and regulations.
Looking at the defendants, apart from Special Zone Construction and Development Group, the other three entities are core project entities under the China South City Group. Among them, South China International Industrial Materials City (Shenzhen) Co., Ltd. and Xi'an South China City Co., Ltd. are two flagship project companies in China South City's nationwide layout. Shenzhen Shenji No.1 Industrial Park Investment and Operation Co., Ltd. is the operational platform for the industrial park project jointly developed by both parties.
Considering the cause of action, it is highly probable that Special Zone Construction and Development Group provided joint liability guarantees for the aforementioned loans, hence its inclusion as a defendant.
China South City Crisis Erupts, Special Zone Construction and Development Group Steps In for Bailout Public information shows that Special Zone Construction and Development Group is a municipal comprehensive investment and financing platform company established in 2011 by the Shenzhen Municipal Party Committee and Municipal Government to accelerate the reform of the investment and financing system and promote the integration process of the special zone. In 2016, it was designated as the municipal infrastructure investment, construction, and operation platform. As a municipal state-owned enterprise, Special Zone Construction and Development Group's business layout is deeply intertwined with Shenzhen's urban development, focusing on three major sectors: park development, urban renewal, and infrastructure.
The intersection between Special Zone Construction and Development Group and China South City began with the latter's debt crisis. Starting in 2021, affected by industry adjustments and the concentrated maturity of overseas debts, China South City Group's capital chain continued to be under pressure, with multiple projects stalling. To revitalize assets and resolve liquidity risks, China South City introduced state-owned capital for a bailout, and Special Zone Construction and Development Group stepped in as the white knight.
According to public reports, in May 2022, Special Zone Construction and Development Group subscribed to 3.35 billion new shares of China South City for 1.9095 billion Hong Kong dollars, obtaining a 29.28% equity stake and becoming the single largest shareholder. Subsequently, Special Zone Construction and Development Group provided multiple capital injections to China South City: in July 2022, it signed a keepwell agreement with Citicorp International to help China South City complete the extension of five dollar-denominated bonds; in December 2022, it also acquired a 69.35% stake in Xi'an South China City for 5 billion yuan.
At that time, the entry of state-owned capital was seen by the market as a key signal for China South City to resolve its debt risks. However, the bailout did not completely reverse the crisis. In February 2024, China South City officially announced a default; in the second half of 2025, due to failure to repay overseas dollar bonds on schedule, creditors submitted a winding-up petition to the Hong Kong High Court against China South City; in early 2026, the Hong Kong High Court formally issued a winding-up order, requiring debt restructuring and liquidation of China South City.
Bailout Fallout Continues, Mired in Losses for Consecutive Years Since participating in the China South City bailout project, the financial pressure on Special Zone Construction and Development Group has continuously increased, and it has been mired in losses for consecutive years.
According to annual report disclosures, as of the end of 2025, Special Zone Construction and Development Group's total assets were 89.633 billion yuan. Annual operating revenue was 7.667 billion yuan, a year-on-year decrease of 36.91%. Net profit was -1.068 billion yuan, with the loss narrowing and a year-on-year reduction in loss of 63.41%. The company's net profits for 2023 and 2024 were -4.368 billion yuan and -2.919 billion yuan, respectively. Entering 2026, Special Zone Construction and Development Group has still not emerged from the mire of losses, reporting a net profit of -258 million yuan for the first quarter.
It is noted that prior to being pursued for debt by Huaxia Bank Shenzhen Branch, Special Zone Construction and Development Group had already been involved in cross-border debt litigation. Public reports show that in June 2024, Special Zone Construction and Development Group received a writ of summons from the Hong Kong High Court. Citicorp International claimed that Special Zone Construction and Development Group breached its obligations under the keepwell agreement signed for the extension of China South City's senior notes, seeking compensation of not less than 1.407 billion US dollars.
The Huaxia Bank Shenzhen Branch pursuing this debt belongs to the bank's Guangdong-Hong Kong-Macao Greater Bay Area Division (including Shenzhen, Guangzhou, Haikou, and Hong Kong). In 2025, Huaxia Bank's Guangdong-Hong Kong-Macao Greater Bay Area Division achieved operating revenue of 6.501 billion yuan, a year-on-year increase of 6.85%, and an operating profit of -1.255 billion yuan, marking two consecutive years of losses. The non-performing loan ratio was 1.98%, a year-on-year increase of 0.43 percentage points, indicating significant pressure on asset quality and profitability levels.