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Fast growing trust sector in China
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CHINA’S trust industry expanded at the fastest rate in two years in the second quarter this year to surpass the scale of 15 trillion yuan (US$2.4 trillion), growing in pace with the country’s frothy stock market.
Assets under management of China’s 58 trust companies rose 10.13 percent from a quarter earlier to a record high of 15.87 trillion in the second quarter, the China Trustee Association said in a quarterly report today.
The pace accelerated from a growth of 3 percent in the first quarter and was the fastest since the second quarter of 2013.
“The increase is mainly boosted by the demand of Chinese households to relocate their savings to higher-return investment assets,” Yin Xingmin, director of Trust Research Center of Fudan University.
The surge in trust assets helped to fuel a boom in China’s stock market as trust firms invested 1.41 trillion yuan, or 9.53 percent of their total managed assets, in equities, up from the proportion of 5.77 percent in the first quarter, data showed.
Trust companies are part of China’s grey financing network which lends money to individuals and companies to buy stocks at high leverage. The shadow lending system is widely blamed for fuelling a highly leveraged bull run in China’s stock market and then triggering a free fall of 30 percent in three weeks.
“As the stock market gradually returns to the trend of value investment, stock investment by trust assets is expected to decline,” Yin said.
Profits made by China’s trust companies totaled 39.2 billion yuan, up 131 percent from a quarter earlier and rising 35 percent year on year, data showed.
As of the end of second quarter, there were 450 projects that have repayment difficulties, involving funds of 103.4 billion yuan, up 6 percent from the first quarter.
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