Sometimes the entrepreneurial success story has a rotten ending. Take Deng Hongjiu, who started at 17 as a porter at a Chongqing wharf in 1987, began selling tangerines two days a week, and eventually built China's largest durian distribution empire. This week, that empire officially ceased to exist when the Hong Kong Stock Exchange forcibly delisted his company, Chongqing Hongjiu Fruit Co. Ltd. (6689.HK), marking the symbolic end of one of China's more colorful corporate collapses.

The trajectory was remarkable while it lasted. In 2002, Deng and his wife Jiang Zongying founded Hongjiu Fruit Products. Ten years later, Deng made what looked like a brilliant bet, raising 100 million yuan ($14.3 million) to build a factory in Thailand focused on durians. As China developed an appetite for the famously pungent fruit, Deng's early positioning earned him the nickname "durian king." By 2021, his company had locked in a huge chunk of the market through long-term supply contracts with major supermarkets and had expanded into other high-end fresh fruits including dragon fruit, mangosteens, longans, grapes and cherries.

From Market Leader to Trading Halt

By September 2022, when Hongjiu went public in Hong Kong, things looked spectacular. The company had subsidiaries in Thailand, Chile, Vietnam and the Philippines, branches in 17 Chinese cities, and its own cold chain logistics system. Pre-IPO investors included heavyweight names like Alibaba and China Merchants Capital. 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).

Fast forward to Christmas Eve 2024. The Hong Kong Stock Exchange announced it would cancel Hongjiu's listing effective December 30. Major investors including Invesco Great Wall Fund Management and Harvest Fund Management publicly stated their holdings were now worthless. What happened in those 27 months is a case study in how quickly things can go sideways in the fresh produce business.

The unraveling began in March 2024 when the company suspended trading in its shares after auditor KPMG questioned the 2024 annual results and resigned shortly afterward. KPMG suspected Hongjiu was running a circular financing scheme: paying large sums to fake suppliers, who then returned the money to Hongjiu as fabricated customers. This inflated revenue figures and created fictional accounts receivable. Meanwhile, Deng and his wife were borrowing money and pledging their shares as collateral to keep the sinking business afloat.

Hongjiu hasn't filed any financial statements since September 2023, when it reported a profit of 802 million yuan on 8.5 billion yuan in revenue for the first half of that year. Here's the problem though: despite steady revenue growth leading up to the IPO, the company had been cash flow negative since at least 2019, and that deficit was growing steadily.

When Durian Prices Crashed

Hongjiu had managed to paper over its cash flow problems for years, but everything changed with a sharp collapse in durian prices in 2023 and 2024. That's when KPMG started noticing red flags. In the fourth quarter of 2023, Hongjiu recorded unusual transactions, paying 3.42 billion yuan in advance payments to new suppliers. That represented roughly three-quarters of the company's total advance payments for the entire year.

The details were suspicious. Some of these new suppliers had no employees enrolled in mandatory government social security programs. Others had registered capital less than the advance payments they supposedly received. It didn't add up.

Things escalated in April 2024 when Deng, Jiang and six other executives were arrested in Chongqing on suspicion of loan fraud. The allegation: Hongjiu was using fake accounts receivable from fabricated sales as collateral for bank loans. Deng and four other executives remain detained, while others were released in May. Three independent directors resigned after the arrests, which became a significant factor in the Hong Kong Stock Exchange's decision to delist the company.

What Comes Next

Hongjiu continues to limp along, run by remaining managers and employees. The company applied for court-led restructuring in April, which will likely involve selling assets. That could include its 16 fruit processing plants and cold chain logistics infrastructure to pay off creditors.

Hongjiu's story isn't happening in isolation. Its two biggest competitors, Pagoda Industrial (2411) and Xianfeng Fruit, are struggling too. 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 plans as a result.

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

Systemic Problems in China's Fruit Industry

The challenges extend beyond individual companies. China's fresh fruit sector faces structural issues that make success difficult even for well-run operations. The rise of community buying platforms and fresh food e-commerce has eaten into traditional supermarket sales. The spoilage rate in China's fresh produce industry runs between 20% and 30%, compared to just 5% in developed countries, partly due to lack of standardization.

The supply chain from orchards to retailers contains compliance risks at every stage. According to Chinese media reports, nearly 30% of domestic fresh food retail companies have problems with invoice management, 25% haven't established proper quality traceability systems, and 15% have cold chain logistics that don't meet industry standards.

Hongjiu's governance structure made matters worse. The company was essentially family-run throughout most of its history, which isn't exactly a recipe for strong oversight. Before the IPO, the family held more than 46% of 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.

A Perfect Storm

To be fair, Hongjiu faced some genuinely unpredictable challenges. The crash in durian prices may have triggered the downward spiral. Its positioning at the high end of the fresh fruit market also exposed it to shifting consumer tastes and weakening demand as China's economy slowed and consumers pulled back on spending.

But those external factors don't explain the alleged fraud. They might explain why a company struggles or even fails. They don't explain fake suppliers and fabricated customers. That's a choice, and it's one that transformed what could have been a story about difficult market conditions into one about criminal investigations and worthless shares.

For investors who bought into the durian king's vision, it's a sour ending to what once looked like sweet success. Three years from IPO to delisting is remarkably fast, even by the standards of spectacular corporate failures. And somewhere in a Chongqing jail cell, the porter who became the durian king has plenty of time to think about how it all went wrong.