Four Things to Know About China’s Trust Industry Bailout Fund

Government takeovers of two troubled financial institutions — regional lender Baoshang Bank Co. Ltd. and Anbang Insurance Group Co. Ltd. — have tested the mettle of China’s regulators and the system of safety nets built up over the past decade to protect the financial system from potentially destabilising shocks.

Rarely used components of that institutional framework have been thrust into the spotlight by the seizures, namely the four bailout funds covering the main parts of the financial sector — banking, insurance, trusts and securities. These funds provide financing to distressed companies, prevent their financial problems from spilling over into other companies and other parts of the financial system, and compensate customers, investors and counterparties who have lost money.