Risks surge along with assets in China’s trust industry

China’s trust industry topped 16 trillion yuan last year, but along with the increase in assets came an increase in the underlying risks.

abacus1China’s 68 trust companies saw assets under management grow to 16.3 trillion yuan by the end of December, a 16.6% over the same period in 2014, the China Trustee Association said in a report it released Wednesday.

Industry profits grew 17% year over year to 75 billion yuan, the association said.

By the end of the year, 464 products worth 97.3 billion yuan were at risk at year’s end, 0.09 percentage points less than in the third quarter, the association said. Most of these assets are illiquid.

The industry is not facing systemic risks, said one of the report’s authors, Yin Xingmin, a professor of School of Economics at Fudan University in Shanghai.

However, other experts said problems are greater than the association indicated.

Trusts typically invest their money in real estate, securities and other assets. Since 2008, the growth of these investments has been fueled by companies and local governments seeking to finance infrastructure and property projects.

Industry experts, who asked not to be named, spoke with Chinese media agency Caixin and said default risks still exist in the industry, in spite of regulators banning non-bank lending. Cases in which trust products appeared on the verge of default are “the tip of the iceberg,” the expert said.

In addition, the weakened economy will raise the risk of default since the deadline for many borrowers to make full payment of principle and interest is approaching, an executive of a trust firm told Caixin.



Categories: Asia Unhedged, China

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