Tens of Thousands of Investors Harmed! *ST Changyao's Major Violations Force Delisting, Three Years of Fictitious Revenue of 7.3 Billion Yuan Results in Fines of Tens of Millions of Yuan

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This newspaper (chinatimes.net.cn) reporter Wang Yu and Na Beijing report

A major case of illegal delisting due to financial fraud has occurred again in the A-share market. Changjiang Pharmaceutical Holdings Co., Ltd. (300391.SZ, hereinafter *ST Changyao), which has long operated on the edge of compliance, has paid a painful price for years of ongoing financial falsification.

On March 12, the company officially disclosed the Shenzhen Stock Exchange’s “Decision on the Termination of Listing of Changjiang Pharmaceutical Holdings Co., Ltd.,” officially confirming the delisting schedule. The company’s stock will enter the delisting restructuring period starting March 20, lasting 15 trading days, with the final trading day expected to be April 10. After the restructuring period, the stock will be officially delisted the next day, ending its life in the capital market.

Faced with this outcome, *ST Changyao expressed apologies to investors in its announcement. Regarding the issue of investor rights being harmed due to mandatory delisting, Xu Huageng, Director of the Financial Law Research Center at Capital University of Economics and Business Law School, told Huaxia Times that the company’s financial fraud constitutes a typical securities false statement infringement, severely violating information disclosure obligations, misleading investors’ investment decisions, and investors suffering damages can legally file civil lawsuits against the issuer and responsible persons to seek civil compensation and protect their legal rights through legal channels.

Huaxia Times reporter contacted the *ST Changyao Secretary Office regarding compensation issues but had not received a reply as of press time.

This wave of issues caused by performance fraud and operational disorder ultimately ended with *ST Changyao’s forced delisting. Senior consultant Shi Tianyi from Zhijun Consulting told Huaxia Times that this case also serves as a warning to small and medium-sized listed companies: regulators have “zero tolerance” for financial fraud, and the authenticity of information disclosure is a bottom line. As the cost of violations increases significantly, any luck-based mentality will lead to destruction of market value. Only compliant operation can ensure survival.

Three years of financial fraud

The core reason for *ST Changyao’s forced delisting is financial fraud, which falls under the category of major illegal delisting on the Growth Enterprise Market.

*ST Changyao was formerly Kangyue Technology, which at that time mainly engaged in internal combustion engine parts and photovoltaic equipment. In 2020, it acquired Changjiang Xing Pharmaceutical to shift to the pharmaceutical main business, forming a “pharmaceutical + photovoltaic” dual-core structure. The photovoltaic business once contributed more than half of revenue but was halted in December 2025 due to intensified industry competition, ongoing losses of subsidiaries, and insolvency. In terms of pharmaceuticals, the company mainly produces and sells Chinese medicine decoction pieces, and engages in wholesale of medicines and medical devices, as well as retail. The acquisition of Changjiang Xing Pharmaceutical in 2020 also laid the groundwork for its delisting.

On November 7 last year, *ST Changyao was investigated by the China Securities Regulatory Commission for suspected false records in periodic reports and other financial data. Just over a month later, the company received a “Preliminary Notice of Administrative Penalty.”

According to disclosures, in November 2020, *ST Changyao acquired a 52.75% stake in Changjiang Xing Pharmaceutical, and in December of the same year, it was included in the consolidated financial statements. The original controller of Changjiang Xing, Luo Ming, promised to meet performance targets for 2020–2022.

To fulfill these commitments, Luo Ming led two subsidiaries of Changjiang Xing—Hubei Changjiangyuan Pharmaceutical and Hubei Xinfeng Pharmaceutical—to produce false inbound and outbound warehouse documents, and in the absence of real sales, illegally recognized revenue, directly causing the company’s financial reports to be distorted.

In 2021, *ST Changyao inflated operating income by 215.3238 million yuan, accounting for 9.12% of the disclosed revenue, and inflated total profits by 56.4014 million yuan, accounting for 35.62% of the disclosed profits. In 2022, it inflated operating income by 283.7366 million yuan (17.57%) and total profits by 63.3752 million yuan (88.23%), plus additional illegal profit inflation of 4.5524 million yuan due to project loss recognition violations. In 2023, it inflated operating income by 233.6346 million yuan (19.51%) and total profits by 43.705 million yuan (6.42%).

Over three consecutive years of financial fraud, the company inflated revenue by over 730 million yuan and profits by over 160 million yuan. In response to this serious violation, the CSRC imposed strict penalties: ordered correction, issued warnings, and fined 10 million yuan; fined a total of 31 million yuan to 14 responsible persons, including lifetime securities market bans for Luo Ming, the former general manager and controller of Changjiang Xing. After review by the listing review committee, the final decision was to terminate the listing of the company.

Xu Huageng stated that false financial statements conceal the company’s true operating conditions and mislead investors into making wrong decisions. Investors can sue the issuer and responsible persons for civil compensation.

On March 12, *ST Changyao officially announced the delisting schedule. Its delisting demonstrates the A-share market’s zero-tolerance attitude toward financial fraud and effectively enforces the major illegal delisting system.

Main business collapse

Apart from the core reason of financial fraud, *ST Changyao’s own operations have long been in collapse.

Looking at operational performance, the company’s main business has been bleeding continuously. After excluding the inflated data from fraud, in 2024, the company’s net profit suffered a huge loss of 628 million yuan, with net profit excluding non-recurring gains and losses remaining negative for three consecutive years, raising doubts from auditors. Zhongshen Yatai Certified Public Accountants issued an unqualified opinion with a “significant uncertainty” paragraph regarding its 2024 financial report, marking the second consecutive year the company received a “non-standard” audit opinion.

Since 2025, the company’s decline has worsened. Performance forecasts show a total loss of 600–900 million yuan, with net loss attributable to shareholders of 350–520 million yuan. The company explained that “provision for credit impairment losses is estimated at about 400 million yuan, mainly due to poor recovery of receivables, with an allowance for bad debts of about 340 million yuan.”

Notably, in the first three quarters, the company’s net cash flow from operating activities was -134 million yuan, indicating ongoing cash flow exhaustion.

Financially, the company is insolvent and frequently defaults on debts. As of September 30, 2025, *ST Changyao’s total assets were 1.924 billion yuan, total liabilities reached 2.591 billion yuan, and shareholders’ equity was -668 million yuan, indicating severe insolvency.

Judicially, the company and its subsidiaries are mired in debt lawsuits. As of December 22, 2025, there were 151 lawsuits and arbitration cases involving the company and subsidiaries, with a total amount of 1.93046 billion yuan, accounting for 446% of the latest net assets. The company and its subsidiaries have opened 161 bank accounts, of which 117 are under judicial freeze, with a freeze rate of 72.67%, and frozen account balances totaling 6.0464 million yuan. Meanwhile, the unpaid taxes of its controlling subsidiary, Changjiang Xing Pharmaceutical, amount to 120 million yuan, posing a risk of inability to pay taxes on time due to cash flow issues.

In terms of internal control, Luo Ming, as head of Changjiang Xing Pharmaceutical, has long led financial fraud, highlighting the failure of the company’s internal control mechanisms and infringing on investors’ right to information.

*ST Changyao’s delisting is the inevitable result of multiple issues—financial fraud, operational disorder, and internal control failure. As Shi Tianyi said, the delisting serves as a warning to small and medium-sized listed companies: regulators have “zero tolerance” for financial fraud, and the truthfulness of information disclosure is a bottom line. As the cost of violations rises sharply, any complacency will lead to destruction of market value. Only compliant operation can ensure survival.

Editor: Jiang Yuqing Chief Editor: Chen Yanpeng