Shanghai Pharmaceuticals' subsidiary is accused of being involved in a massive financial dispute.

CCTV reporter Yan Guowen and Lu Zhikun report from Beijing

The general manager is missing, suspected of forging seals, and over 20 companies are implicated… Recently, Shanghai Pharmaceuticals (601607.SH, 02607.HK), the second-largest pharmaceutical commercial enterprise in the country, has been accused of being involved in a massive economic dispute along with its subsidiary and its general manager.

“My core demands are: first, I hope to recover the 2.4 million yuan payment for the Chinese medicinal materials; second, Shanghai Pharmaceuticals, as a state-owned listed company, needs to publicly address and properly handle this matter, and someone must bear supervisory responsibilities; third, I hope this matter will attract the attention of higher-level disciplinary inspection and supervision commissions as well as the State-owned Assets Supervision and Administration Commission.” On March 24, Yin Liang, the legal representative of Hainan Liancai Marine Biotechnology Co., Ltd. (hereinafter referred to as “Hainan Liancai”), stated in an interview with the China Business Journal.

In January 2025, Sichuan Shangyao Shendu Chinese Medicine Co., Ltd. (hereinafter referred to as “Sichuan Shangyao Shendu”), a subsidiary of Shanghai Pharmaceuticals, purchased 240,000 yuan worth of the Chinese medicinal material Radix notoginseng from Hainan Liancai. However, after May of the same year, the manager in charge, Chen Moumou, has been missing for a long time. On June 20, 2025, after Sichuan Shangyao Shendu reported the case, Chen was placed under criminal investigation by the Public Security Bureau of Dujiangyan City, Sichuan Province, for suspected forgery of the company’s seal.

Yin Liang discovered that over 20 other suppliers or companies had the same experience as him, involving Chinese medicinal materials, agricultural products, logistics, banks, and small loan companies, including both private and state-owned enterprises, with a total amount involved possibly exceeding 260 million yuan. Journalists found that at least three listed companies, YXTT (002727.SZ), Zhenbaodao (603567.SH), and Panlong Pharmaceutical (002864.SZ), had subsidiaries involved in this matter.

Starting in the second half of 2025, most suppliers began to sue Sichuan Shangyao Shendu one after another. On January 28, 2026, the People’s Court of Dujiangyan City ruled that Sichuan Shangyao Shendu must pay Hainan Liancai 2.4 million yuan. On January 8, 2026, the Intermediate People’s Court of Chengdu ruled to uphold the original judgment, ordering Sichuan Shangyao Shendu to pay Yunnan Hongxiang Chinese Medicine Technology Co., Ltd. (hereinafter referred to as “Yunnan Hongxiang,” a wholly-owned subsidiary of YXTT) 18.9954 million yuan for goods.

On March 27, Shanghai Pharmaceuticals stated to reporters that regarding the personal criminal matters, Sichuan Shangyao Shendu had conducted a self-examination and promptly suspended the person involved and reported the case to the public security organs, taking judicial measures to timely protect its own and related third parties’ legal rights. As of now, the case is still in the criminal investigation stage, and the relevant facts should be based on the final determination by judicial authorities. Due to the criminal suspicion related to the individuals, Sichuan Shangyao Shendu will, within the legal framework, negotiate amicably with third parties to resolve disputes. As of now, the relevant disputes are still in the process of being handled.

No payment has been received to date

Shanghai Pharmaceuticals holds 100% of Shanghai Medicinal Materials. Shanghai Medicinal Materials holds 51% of the shares in Sichuan Shangyao Shendu.

“I had been in contact with Chen Moumou for quite a while and had also visited Sichuan Shangyao Shendu for an on-site inspection. Because of the relationship with the state-owned enterprise and Shanghai Pharmaceuticals, we trusted Sichuan Shangyao Shendu very much. In early 2025, Sichuan Shangyao Shendu purchased 10,000 kilograms of Radix notoginseng from us at a price of 240 yuan per kilogram, totaling 2.4 million yuan. It was agreed that the invoice would be issued three months later, and we fully supported that. During the Dragon Boat Festival in 2025, we tried to call Chen Moumou, but there was no answer. At that time, I had a bad feeling but never expected he would run away and go missing,” Yin Liang explained.

On the last day of the Dragon Boat Festival holiday in 2025, Yin Liang learned through other channels that Chen Moumou had gone missing. He immediately rushed to the Sichuan Shangyao Shendu company. Yin Liang encountered many others who had similar experiences. “After communicating with other suppliers, everyone sensed that he might have fled with the money.”

The first-instance judgment from the People’s Court of Dujiangyan City shows that Hainan Liancai signed a procurement contract for Chinese medicinal materials with Sichuan Shangyao Shendu, and the specific content is consistent with what Yin Liang stated.

After the contract was signed, Hainan Liancai entrusted Yunnan Yongwang Logistics Co., Ltd. as the transportation provider, transporting the goods to the designated location of Sichuan Shangyao Shendu at 399 Logistics Avenue, Xindu District, Chengdu, on January 12, 2025.

Sichuan Shangyao Shendu argued that Hainan Liancai was not on its list of qualified suppliers, so there could not be any actual goods trading relationship between them. The former general manager, Chen Moumou, has been criminally charged for forgery, and the transaction was a contract for the procurement of Chinese medicinal materials signed by Chen using a forged seal with Hainan Liancai.

The People’s Court of Dujiangyan City concluded that Chen Moumou, as the general manager of Sichuan Shangyao Shendu during the signing and performance of the relevant contracts, acted in the name of Sichuan Shangyao Shendu to purchase goods and sign the procurement contract, and communicated with Hainan Liancai regarding purchases and receipts as the general manager, which was sufficient to convince the transaction counterparty, Hainan Liancai, that Chen Moumou represented Sichuan Shangyao Shendu externally. Chen’s agency actions should have legal effects on Sichuan Shangyao Shendu, and whether the seal was forged does not affect the validity of the involved sales contract.

On January 28, 2026, the People’s Court of Dujiangyan City ruled that Sichuan Shangyao Shendu must pay Hainan Liancai 2.4 million yuan within ten days.

Yin Liang stated that the first-instance judgment has taken effect, but they have not received any payment to date.

The general manager is missing

Lai’an County Yasheng Chinese Medicinal Materials Planting Co., Ltd. is also one of the suppliers of Sichuan Shangyao Shendu.

On March 26, the legal representative of this company, Meng Fanke, told reporters: “In the second half of 2024, they purchased 500 kilograms of centipede from us, priced at 2,500 yuan per kilogram, with payment agreed upon three months later. We delivered the centipedes to their warehouse, and they signed the receiving document. Since this is a subsidiary of Shanghai Medicinal Materials under Shanghai Pharmaceuticals, which has state-owned and listed company backgrounds, we were very trusting and did not rush for payment as agreed. In May 2025, after repeatedly urging for payment, we learned that ‘something went wrong.’ On June 9, when we arrived at Sichuan Shangyao Shendu, we found out that Chen Moumou had ‘run away.’ I do not know how much this batch of goods was sold for in Jingmen, Hubei.”

Meng Fanke indicated that 1.25 million yuan is listed as accounts receivable from Sichuan Shangyao Shendu. His current core demand is to recover the payment. “Not being able to collect the payment has a significant impact on our company’s operations. Our company is small, and we were also borrowing money from others to supply goods. Now others want to sue us, which is very troublesome.” Due to the pressure of litigation costs and the difficulty of recovering payment through litigation, he has not yet filed a lawsuit.

Based on information obtained from local relevant departments and communication among suppliers, Yin Liang and Meng Fanke analyzed that the parties involved might have made money when the market for Chinese medicinal materials was good, then blindly invested and lost money. Later, it may have led to a series of absurd behaviors due to a broken pot and the need for more lies to cover up initial lies.

However, the reporter cannot yet verify the above statements about the parties involved.

The reporter sorted through publicly available information and found that not all lawsuits from suppliers of Sichuan Shangyao Shendu have received support from the courts. Sichuan Shudi Yuan Chinese Medicinal Materials Co., Ltd. (hereinafter referred to as “Sichuan Shudi Yuan”) also sued Sichuan Shangyao Shendu due to a sales contract dispute.

According to the civil judgment document No. (2025) Chuan 0623 Minchu 3432, the People’s Court of Zhongjiang County rejected all of the plaintiff Sichuan Shudi Yuan’s litigation claims.

At the same time, a series of filed complaints and judicial documents made public by the People’s Court also confirm that Chen Moumou was missing from July 2025 until March 2026.

On the afternoon of March 24, local people visiting the scene informed reporters that the factory gate of Sichuan Shangyao Shendu was half open, and several cars were parked inside the factory, with no unusual activity observed from outside. The reporter called the company’s phone, but no one answered.

At least three listed companies involved

Yin Liang informed reporters that most of the deceived suppliers and companies have sued Sichuan Shangyao Shendu and Chen Moumou. However, some suppliers and companies may not have sued yet due to special circumstances. “Some businesses may have been entirely for bill purposes, and some do not hold up under scrutiny and lack sufficient evidence chains. Some defrauded state-owned enterprises may fear embarrassment, and leaders may worry about being disciplined,” Yin Liang stated.

It is understood that among the implicated suppliers are also subsidiaries of three listed companies: YXTT, Zhenbaodao, and Panlong Pharmaceutical, with subsidiaries of both YXTT and Zhenbaodao already having filed lawsuits.

A second-instance judgment document obtained by reporters shows that on December 20, 2024, and March 26, 2025, Sichuan Shangyao Shendu signed eight procurement contracts for Chinese medicinal materials with Yunnan Hongxiang, a subsidiary of YXTT, purchasing Radix notoginseng for a total amount exceeding 18.99 million yuan. After the contracts were signed, staff from Sichuan Shangyao Shendu, following Chen Moumou’s instructions, went to Yunnan Hongxiang to pick up the goods and shipped the medicinal materials to enterprises in Henan.

On January 8, 2026, the Intermediate People’s Court of Chengdu ruled to uphold the original judgment, ordering Sichuan Shangyao Shendu to pay Yunnan Hongxiang 18.9954 million yuan.

In October 2025, Guizhou Shennong Valley Chinese Medicine Industry Co., Ltd. (hereinafter referred to as “Guizhou Shennong Valley”), a subsidiary of Zhenbaodao, also sued Sichuan Shangyao Shendu and Chen Moumou due to a sales contract dispute. The list of legal disputes shows that the amount involved for this company is 1.5 million yuan.

On March 26, 2026, Zhenbaodao stated to reporters: “Upon understanding, Guizhou Shennong Valley had business dealings with Sichuan Shangyao Shendu in the early stages, and the other party still owes Guizhou Shennong Valley part of the payment, and the company is currently pursuing the matter in court.”

It is understood that in May 2025, Sichuan Shangyao Shendu also purchased Radix notoginseng from Shaanxi Shangluo Panlong Plant Pharmaceutical Co., Ltd. (hereinafter referred to as “Shaanxi Panlong,” a subsidiary of Panlong Pharmaceutical). A statement signed by a salesperson from Sichuan Shangyao Shendu named Ren Mou indicated that he went to Shaanxi Panlong to collect the goods following the instructions of general manager Chen Moumou and shipped the medicinal materials to pharmaceutical companies in Zhejiang and Jiangsu. The procurement model for the Chinese medicinal materials was consistent with that of other suppliers.

Regarding the above situation, neither YXTT nor Panlong Pharmaceutical has responded to reporters’ verification or interview requests.