23 July 2019

Trusts Flourishing In China, for Now

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BEIJING—Chinese investors poured more than $200 billion into trust investments, the main part of the country's shadow banking system, in the first quarter, but the industry warned it faces tougher competition as banks and brokerages encroach on its turf.

The China Trustee Association said Wednesday that trusts, a type of wealth-management company common in China, had 8.73 trillion yuan ($1.42 trillion) of assets under management at the end of March, up 17% from three months earlier. That growth was led by financing of infrastructure projects, which received 461.3 billion yuan of new funding from trusts in the first quarter, almost five times the amount a year earlier.

With Chinese savers short of good investment options—the country's stock markets have yet to recover from a 2008 crash and government efforts to curb property speculation have made it difficult for people to park excess cash in real estate—trust companies have come to dominate China's wealth-management sector by giving investors a way to make money through lending to companies that need cash.

But trusts are now warning that the days of runaway profits may be over as the government moves to restrict lending in areas where the trusts have been most active and as new regulations allow other financial institutions to provide services that were once the primary domain of trusts.

"With banks, funds, securities companies and third party managers successively entering the wealth management space, wealth management competition is becoming white hot," said Beijing-based National Trust Ltd., which isn't publicly traded, in its recently published annual report.

This article originally appeared in the The Wall Street Journal. To read the full article click here.  

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