100 million stolen, 900 million frozen! China's number one mattress stock, hit with a big shock.

Ask AI · Why Does the Family Governance of Xilinmen Lead to a 100 Million Yuan Fund Leak?

Why would a industry leader listed for 14 years have such an absurd incident where billions of yuan in funds are easily transferred by insiders?

Source | Chief Brand Commentator (ID: SX_PPPL)

Image | AI Generated

A industry leader in the sleep business, shouting “Let no one sleep tonight,” after 40 years, has now fallen into complete insomnia itself.

On the evening of March 27, a notice from Xilinmen, known as the “First Stock of Chinese Mattresses,” shook the entire home furnishing industry and capital markets:

The company’s subsidiary, Xitu Technology, had 100 million yuan in bank account funds illegally transferred. After investigation, it was found that internal personnel exploited their positions to embezzle funds. The company has applied for criminal investigation with the police, and to prevent risks, has implemented protective freezing on related accounts, with frozen funds totaling up to 900 million yuan.

8.73B stolen, 900 million frozen, totaling 1 billion yuan in funds turmoil, accounting for 42.69% of the company’s cash on hand. On the same night the announcement was released, the Shanghai Stock Exchange quickly issued a regulatory work letter, holding accountable the company’s directors, senior executives, controlling shareholders, and actual controllers.

Why would a industry leader listed for 14 years have such an absurd incident where billions of yuan in funds are easily transferred by insiders?

8-person subsidiary, hollowed out 100 million yuan

Let’s first look at the most bizarre part of this incident: the involved Xitu Technology is a micro subsidiary with a registered capital of only 50 million yuan, and according to 2024 business registration info, it has only 8 employees.

Such a company of just 8 people surprisingly holds over 100 million yuan in cash, which is 200% of its registered capital. Even more outrageous, when Southern Metropolis Daily’s finance reporter contacted Zhou Yaying, the legal representative, director, and manager of Xitu Technology, she straightforwardly said she was “completely unaware” of the 100 million yuan embezzlement, merely a “nominal legal representative.”

According to basic internal control requirements for listed companies, large fund transfers must go through application, review, multi-level approval, and double-check processes. Payments exceeding tens of millions usually require signatures from the CFO, general manager, or even the chairman, let alone a billion yuan.

Whether this money was transferred in one go or split into multiple batches, we currently do not know. But regardless of the method, a subsidiary of a listed company, with its legal representative unaware, and only 8 employees controlling over 559M yuan, can bypass all financial approval processes of the parent company and illegally transfer such a huge sum. This is no longer a simple “risk control loophole,” but a complete collapse of the entire internal control system.

Ironically, just last November, Xilinmen’s board of directors had specifically approved the “Subsidiary Management System” and “Internal Audit System,” claiming to strengthen control over subsidiaries. Just four months later, these systems were brutally exposed by reality, turning into a joke in the capital market.

The root of family-style governance

Fundamentally, this 100 million yuan embezzlement case is not just a financial accident but a consequence of Xilinmen’s deeply ingrained family governance model.

In 1984, 22-year-old Chen Ayu started a mattress workshop in Shaoxing with 1,000 yuan in startup capital, relying on resilience to carve out a path in the furniture industry. In 2012, Xilinmen listed on the Shanghai Stock Exchange, becoming the “First Stock of Chinese Mattresses.” At its peak, over 500 star-rated hotels nationwide used its products, with offline stores across the country.

But after more than 40 years, the company still cannot escape the trap of family governance.

Today, Xilinmen remains a typical family-controlled listed company. Founder Chen Ayu, aged 64, serves as chairman and legal representative. His son, Chen Yicheng, is vice chairman and general manager. The father and son tightly control core decision-making, with family members occupying key positions on the non-independent board of directors, and most other critical roles held by trusted “insiders” of the actual controller.

Family management itself is not inherently wrong. Many private Chinese enterprises originated from family workshops. In early stages, trust and cohesion among family members are vital for survival through cycles. But once a company goes public, its funds are no longer private property but shared assets of tens of thousands of shareholders. Governance must evolve from “rule by people” to “rule of law.”

Xilinmen’s problem lies precisely in its transition to capitalized growth while still adhering to family workshop logic. Under such governance, systems often give way to personal relationships, and processes are often compromised by trust.

Xilinmen’s explosion is not an isolated case.

Just half a year ago, Mengtian Co., another home furnishing listed company, was warned by regulators for illegal loans of over 429M yuan from subsidiaries to natural persons and chaotic financial accounting. Ultimately, only about 10 million yuan was recovered.

China’s home furnishing manufacturing industry is born from the streets and grew through market waves. Many bosses started with a small workshop, building billion-yuan listed companies. But too many enterprises, after scaling up, remain stuck in workshop-level governance; once listed, their thinking has not caught up.

They are willing to spend hundreds of millions on celebrity endorsements and billions on marketing, but reluctant to invest a few million in building an effective internal control system; they are eager to expand channels and cross categories, yet unwilling to spend on corporate governance.

In the end, a small leak can sink a great ship.

The mid-life crisis behind the explosion

This insider event acts like a magnifying glass, exposing the long-standing operational difficulties of Xilinmen. Many do not realize that this mattress industry leader has long been mired in a dilemma of increasing revenue without increasing profits.

Financial data shows that from 2020 to 2024, Xilinmen’s revenue steadily grew from 322M yuan to 8.729 billion yuan. But net profit attributable to the parent company fluctuated wildly, with figures of 3.13 billion, 5.59 billion, 2.38 billion, 4.29 billion, and 3.22 billion over five years. Rising revenue did not translate into rising profits.

On one side, profit growth stagnates; on the other, the company is aggressively diversifying.

In 2015, Xilinmen entered the film and television industry, establishing Shengxi Huashi, which once accounted for a third of the company’s net profit. But the good times didn’t last. As the film industry entered a correction period, related businesses continued to lose money, leading to the company’s first annual loss after listing—up to 438 million yuan in 2018. It was forced to divest its media business and refocus on core operations.

After many twists and turns, the pitfalls of diversification were addressed, but the bottleneck in core business remained unresolved.

China’s mattress industry has long shifted from growth to stock competition. High-end brands like Mousse are fighting fiercely in the premium market, while countless small and medium brands compete on price in lower-tier markets. Online traffic costs are rising, and offline store profitability is under increasing pressure.

At this point of internal and external difficulties, Xilinmen’s billion-yuan fund embezzlement shock surfaced. For a company already under profit pressure, if the 100 million yuan cannot be recovered, it would nearly wipe out a quarter of its net profit in the first three quarters of 2025, severely impacting performance.

Even more damaging is the collapse of brand trust.

Consumers buy mattresses for peace of mind, trust, and confidence in the brand. A company that cannot even safeguard its own billion-yuan funds, how can consumers believe it can produce safe, reliable products and provide trustworthy after-sales service?

Chinese private enterprises have two opportunities for rebirth: the first from workshops to modern industrialization, the second from private to public capitalization.

Many owners think that going public is the ultimate success and a ceiling for growth. But they forget that listing is never the end; it’s a new test. Capital markets provide financing and brand prestige but also impose governance and compliance responsibilities.

Xilinmen’s shock is not just a corporate internal control failure but a wake-up call for governance among Chinese private listed companies.