Spoiled ending for Hongjiu, as Hong Kong delists former fruit highflyer

With founder Deng Hongjiu in jail on suspicion of accounting fraud, the company’s worthless shares have been booted from the Hong Kong Stock Exchange

Key Takeaways:

• Three years after its IPO, Hongjiu has been evicted from the Hong Kong Stock Exchange as it faces a likely restructuring and asset sales to pay off creditors
• Shares of China’s leading fruit distributor were suspended in March 2024, followed by mass management arrests on suspicion of fabricated sales

By Edith Terry

In 1987, a 17-year-old Deng Hongjiu began working as a porter at Chongqing’s Chaotianmen wharf, then soon began selling tangerines two days a week, before setting up his own fruit stall. In 2002, he and wife Jiang Zongying set up Hongjiu Fruit Products. He made a big bet on the Thai durian market 10 years later, raising 100 million yuan ($14.3 million) to build a factory in the Southeast Asian country.

His visionary move, as China went on to embrace the famously pungent fruit, led many to dub Deng as China’s “durian king,” as he locked in a big slice of the lucrative market through long-term supply contracts with large supermarkets. By 2021, his Chongqing Hongjiu Fruit Co. Ltd. (6689.HK) was China’s largest durian distributor and had branched into other high-end fresh fruits, including dragon fruit, mangosteens, longans, grapes and cherries.

But in a tale of fruity fumbling, Deng’s empire came crashing down over the last two years in a storm of price volatility, faked sales and mismanagement, in a sector where timing is of the essence due to the highly perishable nature of fruit. The colorful story of this slow rise and rapid fall of a fruit magnate reached a symbolic end this week, when the company was forcibly delisted from the Hong Kong Stock Exchange.  

Things were far different in September 2022, when a newly listed Hongjiu had subsidiaries in Thailand, Chile, Vietnam and the Philippines, as well as branches in 17 cities across China, as well as its own cold chain logistics system. Its pre-IPO backers included big names like Alibaba and China Merchants Capital, and the listing made Deng and Jiang two of China’s richest people that year, with combined estimated net assets of 8.5 billion yuan ($1.2 billion).

Spring ahead to Christmas Eve last week, when the Hong Kong Stock Exchange announced it would cancel Hongjiu’s listing effective Dec. 30. At least two major investors, Invesco Great Wall Fund Management and Harvest Fund Management, announced that their holdings in the company were worthless.

The beginning of the end came more than a year ago when the company announced a suspension of trading in its shares in March 2024. It took that step after auditor KPMG questioned the company’s 2024 annual results and resigned shortly afterwards. KPMG believed that Hongjiu engaged in a form of circular finance, paying big sums to fake suppliers, who then paid the money back to Hongjiu as fabricated customers to inflate the company’s revenue and provide it with fake accounts receivables. Meanwhile, Deng and his wife were borrowing money, and pledging their shares as collateral, to keep the company’s sinking business afloat.

Hongjiu hasn’t filed any financials since September 2023, when it disclosed that it earned a profit of 802 million yuan on 8.5 billion yuan in revenue during the first half of that year. Despite steady revenue gains in the years running up to its listing, the company had been cash flow negative since at least 2019, and that figure was growing steadily.

Durian shock

Hongjiu found ways to keep its business afloat over the years despite the cash outflow. But it suffered a major shock with a sharp collapse in durian prices in 2023 and 2024. KPMG grew suspicious when Hongjiu started recording unusual transactions in the fourth quarter of 2023, paying 3.42 billion yuan in advance payments to new suppliers – representing about three-quarters of the company’s total advance payments for the year. Some of those new suppliers had no employees enrolled in mandatory government social security programs, and others had registered capital less than the advance payments received.

The plot thickened in April this year, when Deng, Jiang and six other executives were arrested in Chongqing on suspicion of loan fraud. Deng and four other company executives are still being detained, while others were released in May. Hongjiu was allegedly using the fake accounts receivable from fabricated sales as collateral for bank loans to keep the company afloat.

Three independent directors resigned after the initial arrests – a significant factor behind the Hong Kong Stock Exchange’s decision to delist the company.

In the meantime, Hongjiu continues to limp on, run by remaining managers and employees. A major overhaul for the company is likely in store, after it applied for a court-led restructuring in April. That could include the sale of some assets, including its 16 fruit processing plants, as well as its cold chain logistics infrastructure.

Hongjiu’s two biggest competitors, Pagoda Industrial (2411.HK) and Xianfeng Fruit, are in better shape, but not by much. Since August 2024, more than 300 million yuan in Xianfeng Fruit equity held by Chairman Han Shuren has been frozen by a Hangzhou court, likely over a debt dispute. The company shelved its listing plan as a result.

Pagoda’s latest financials showed its revenue fell by 21.8% year-on-year to 4.4 billion yuan in the first half of 2025, as the company swung from profitability into the red with a loss of 342 million yuan. Its sinking fortunes came as it slashed its store count by about one-third, from 6,011 to 4,375.

The fruit sector’s woes are hardly limited to the top players. The rise of newer channels such as community buying and fresh food e-commerce have also eaten into the business of more traditional sellers such as supermarkets. And the spoilage rate in China’s fresh produce industry is as much as 20% to 30%, compared to 5% in developed countries, partly due to lack of standardization.

The industry’s lengthy supply chain that delivers fruits from orchards to final retailers contains compliance risks at every link of that chain. According to Chinese media, nearly 30% of domestic fresh food retail companies have problems with invoice management, 25% have not established a sound quality traceability system and 15% have problems with cold chain logistics that don’t meet industry standards.

Compounding matters for Hongjiu, the company was literally family-run for most of its history – a formula for weak governance. Before the IPO, the family held more than 46% of Hongjiu’s shares and senior management was dominated by family members. Deng was chairman, Jiang was general manager, son Deng Haoji was COO, daughter Deng Haoyu was joint secretary and nephew Yang Junwen was deputy general manager.

Hongjiu suffered its share of unpredictable problems, particularly the crash in durian prices that may have set off its downward spiral. Its positioning at the high end of the fresh fruit market also exposed it to shifting consumer tastes and softening demand as China’s economy slowed and consumers reined in their spending. Those factors ultimately culminated in a sour ending for a company that once set a benchmark for sweet success.

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