Four years of confirmed fraud! The founder of the leading Miao medicine company ST Bailing quietly steps down

On March 27, the Guizhou Bureau of the China Securities Regulatory Commission (hereinafter referred to as “Guizhou Securities Regulatory Bureau”) officially issued the “Administrative Penalty Decision,” confirming that Guizhou Bailing had systematically engaged in financial fraud from 2019 to 2021 by continuously underreporting sales expenses to inflate profits and overreporting expenses in 2023 to balance accounts, with the violations of false reporting in four years’ annual reports ultimately coming to a conclusion.

The Guizhou Securities Regulatory Bureau simultaneously imposed a 10-year ban from the securities market and a fine of 5 million yuan on the company’s founder and former chairman, Jiang Wei, with the Shenzhen Stock Exchange publicly determining that he was unfit to serve as a director or senior executive of a listed company for ten years. Just a day earlier, Jiang Wei submitted a written resignation, withdrawing from his management position for personal reasons. The creator of the “first stock of ethnic medicine” ultimately exited the stage as a responsible violator.

This company, which landed on the Shenzhen Stock Exchange in 2010 and boasts exclusive products like Yindan Xin Nao Tong soft capsules, covering over 600,000 terminals, has faced risk warnings twice in recent years and is expected to report a loss of 60 million to 90 million yuan in 2025, far below the expected annual net profit of 120 million yuan for mid-2025, leading to multiple crises in its development.

From the industry’s perspective, the company’s operation of first underreporting sales expenses to inflate profits and then overreporting sales expenses to cover up the discrepancies, has resulted in several years of financial statement embellishment. The concealment tactics and the lengthy timeline have exposed a complete failure of internal governance. This also means that this once-promising leader in ethnic medicine must not only confront dual pressures from performance and regulation but also fundamentally restructure its internal control system to regain market trust.

The financial fraud of Guizhou Bailing evaded traditional fraud models through cross-period profit adjustments, which is relatively rare in the A-share market. This is not a case of the company pleading “industry commonality,” “objective limitations,” and “active correction,” but rather a systematic violation aimed at manipulating profits. The Guizhou Securities Regulatory Bureau found that the company had subjective faults by balancing accounts through underreporting followed by overreporting, causing a severe negative impact on the market.

Specifically, in 2019, Guizhou Bailing underreported sales expenses by 350 million yuan and overreported profits by 350 million yuan, accounting for 95.73% of the total reported profit for that period (absolute value); in 2020, it underreported sales expenses by 241 million yuan and overreported profits by 241 million yuan, accounting for 115.35% of the total profit for that period; in 2021, it underreported sales expenses by 63.7916 million yuan and overreported profits by 63.7916 million yuan, accounting for 45.04% of the total profit for that period. In 2023, the company overreported sales expenses by 459 million yuan and underreported profits by 459 million yuan, accounting for 93.17% of the total profit for that period.

The above actions directly led to false reporting in the annual reports for 2019, 2020, 2021, and 2023, seriously violating the principle of authenticity in information disclosure.

The Guizhou Securities Regulatory Bureau clearly identified the practice of initially underreporting and then overreporting as a remedial action to cover up earlier fraud, rather than a compliant rectification. Guizhou Bailing’s financial issues are the result of non-standard internal management and are unrelated to industry characteristics. Ultimately, the company was ordered to rectify, warned, and fined 10 million yuan.

Jiang Wei was warned and fined 5 million yuan and banned from the market for 10 years; additionally, the then-general manager Niu Min, financial director Li Hongxing, and eight other executives overseeing sales were collectively fined 9.9 million yuan, with accountability covering the entire chain of decision-making, operations, finance, and supervision.

Jiang Wei is the soul of Guizhou Bailing and the core responsible person for this crisis. In 1996, he acquired the continuously loss-making Anshun Pharmaceutical Factory and revitalized operations through restructuring, quickly increasing output value; in 2010, he led the company to list on the Shenzhen Stock Exchange. Over the years, the company has developed exclusive ethnic medicine matrices such as Yindan Xin Nao Tong soft capsules, Kesu Ting syrup, Vitamin C Silver Qiao tablets, and Xiaoer Chai Gui fever-reducing granules. As of now, Jiang Wei holds 17.55% of the shares and is the actual controller of the company.

In addition to financial fraud, Jiang Wei is also under investigation by the China Securities Regulatory Commission for suspected insider trading and violating restrictions on transferring shares, with a case filed in December 2025.

It is important to emphasize that Guizhou Bailing’s crisis did not suddenly erupt but is a concentrated release of hidden dangers accumulated over many years. In May 2024, due to an internal control audit report issued with a negative opinion in 2023, the company was first subjected to other risk warnings, with its stock abbreviation changed to “ST Bailing”; after rectification, on June 30, 2025, the company briefly removed the “ST” label and restored the abbreviation “Guizhou Bailing.”

The concentrated supervision of the company by the Guizhou Securities Regulatory Bureau began in 2023. In December of that year, on-site inspections revealed that the company had issues such as failing to timely account for sales expenses from previous years, leading to inaccuracies in the information disclosed in the annual reports for 2021 and 2022; in November 2024, the company was filed with the China Securities Regulatory Commission for suspected violations of information disclosure laws and regulations; in December 2025, the case welcomed preliminary results, and on the 23rd of the same month, the company was again subjected to other risk warnings, reverting to the “ST Bailing” status. The company’s stock price also significantly declined as a result, and although it has rebounded somewhat since February this year, as of the close on March 27, it was still down over 10% compared to December of last year.

Jiang Wei once published an open letter on the company’s official WeChat account, admitting that he and the company had faced continuous controversies in recent years, and after removing the “ST” label in 2025, he encountered a lawsuit from Huachuang Securities and was also under investigation by the Securities Regulatory Commission, with the focus directed at him personally.

The dispute between Guizhou Bailing and Huachuang Securities dates back to 2019. At that time, to resolve Jiang Wei’s personal high debt and high stock pledge issues, Huachuang Securities provided 1.4 billion yuan in funding to acquire 11.54% of the company’s shares through a securities industry support fund plan and also provided 361 million yuan in stock pledge loans; both parties agreed that the duration of the rescue fund would be 3-5 years, with a reduction in holdings and exit upon expiration, and Jiang Wei had the right of first refusal for repurchase. However, it ultimately evolved into an intense dispute and litigation, with related cases still in the judicial process.

It is also necessary to point out that for many years, Guizhou Bailing’s sales expenses have been excessively high. Current financial data shows that from 2020 to 2024, the company’s total sales expenses exceeded 8 billion yuan, with nearly 500 million yuan in sales expenses in the first half of 2025.

In September last year, during communications with investors, Guizhou Bailing responded to the high sales expense ratio, stating, “The company previously adopted a ‘large package’ model, which led to unclear product planning, weak channel control, and imprecise management of the sales team, resulting in low per capita sales.” The company is optimizing its sales expense ratio through various measures, but this is a long-term ongoing task. At that time, the company also set its performance target for 2025: total operating revenue was expected to be 4 billion yuan, and net profit was projected to be 120 million yuan.

However, according to the recently released performance forecast for 2025, these targets have not been met. The company’s net profit attributable to the parent is expected to be a loss of 60 million to 90 million yuan, a significant decline of 278.46% to 367.68% year-on-year; the net profit excluding non-recurring items is expected to be a loss of 102 million to 132 million yuan, a year-on-year decrease of 23.73% to 60.13%, with total annual revenue expected to decline by about 20% (2024 revenue was 3.825 billion yuan), resulting in a shift from profit to loss, significantly intensifying operational pressure.

Sales of traditional Chinese medicine are the main source of income for the company, accounting for over 86% in the first half of 2025, and over 94% in the same period of 2024. Revenue in this segment plummeted by 37.07% in the first half of 2025, with a year-on-year decline in gross profit margin of 10.45%. Although revenue from Chinese medicinal materials surged by 299.47% in the first half of 2025, due to its relatively small scale, it only accounted for 0.42% of total revenue in the first half of 2025, which is completely unable to offset the downward trend in traditional Chinese medicine business.

Guizhou Bailing stated that its 2025 performance was affected by multiple factors, including a high proportion of four types of medicines (cold medicines, cough medicines, throat medicines, and fever-reducing medicines), a drop in industry demand after the special public events in 2023, and the company being in a destocking phase; the expansion of fixed asset scale, increased depreciation and amortization expenses, and rising fixed costs in the current period have also had a certain impact on current performance.

It should also be noted that as the largest research and production enterprise for ethnic medicine in China, Guizhou Bailing still possesses a solid industrial foundation. In terms of channels, as of June 30, 2025, the company has established a marketing network covering 32 provinces and cities nationwide, with over 600,000 cooperative terminals, including more than 260,000 chain pharmacy cooperation stores, over 100,000 grassroots medical terminals, and more than 4,500 secondary and higher-level hospitals, with terminal coverage capabilities ranking among the top in the industry.

In terms of production capacity, by 2025, the company’s pre-processing capacity for traditional Chinese medicine materials has increased from 25,000 tons/year to 60,000 tons/year, with significant advantages in large-scale manufacturing, and exclusive ethnic medicine varieties such as Yindan Xin Nao Tong soft capsules have also formed strong product barriers.

On the R&D front, Tang Ning Tong Luo, with over ten years of clinical use experience, is exempt from Phase I and II clinical trials and has directly advanced to Phase III clinical trials for diabetic retinopathy, with 360 patients orderly enrolled, and the indication for type 2 diabetes has also been approved for Phase II clinical trials; Huang Lian Jie Du Wan, as China’s first “general” symptom-type traditional Chinese medicine new drug, has completed Phase III clinical research and is about to start pre-marketing communication. If approved smoothly, it will achieve a breakthrough in “symptom-type” traditional Chinese medicine new drugs in China.

Regarding development in 2026, Guizhou Bailing stated in its interactions with investors that in 2026, the company will further optimize its corporate structure, promote compliance in internal control construction, accelerate innovation and R&D progress, and actively expand marketing areas and channels. By creating four platforms: a large-scale manufacturing platform, an all-channel marketing platform, a major product innovation platform, and an industrial chain integration platform, the company aims to concentrate its advantages to create star products and expand market scale to increase revenue and profits.

Currently, Guizhou Bailing has been subjected to other risk warnings. Although it has not triggered major legal forced delisting situations, issues such as the ST label, historical compliance blemishes, and management turmoil intertwine, making the tasks of removing the ST label and turning losses into profits in 2026 still challenging.

(Source: 21st Century Business Herald)