Chart: Channeling Business Tapers
Following years of rapid growth, the size of trust firms’ channeling businesses, a cornerstone of China’s “shadow banking” system, is showing signs of tapering off.
Trust firms can act as intermediaries to help facilitate lending for banks, other financial institutions or individual investors. In a typical example, a bank invests capital from wealth management products sold to customers into trust products, which can then be funneled to borrowers that are unable to obtain loans from banks, such as local government financing vehicles and real estate developers. Banks bear the risk, while trust firms channel the money.
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