Chart of the Day: China’s Trust Industry Shrinks for 11th Straight Quarter
China’s trust industry has shrunk for the 11th consecutive quarter, indicating that efforts by regulators to curb growth in the shadow banking sector are bearing fruit.
The outstanding assets managed by the country’s 68 trust companies stood at 20.9 trillion yuan ($3.2 trillion) at the end of September, down 2% from the end of June and marking the 11th straight quarter of decline since late 2017, according to the latest quarterly data (link in Chinese) released Thursday by the China Trustee Association.
“The continuous decline … is mainly because the industry is complying with regulatory guidance, actively controlling the growth rate and adjusting the structure (of business),” said the association, an industry body, in a Thursday statement. “That indicates the industry is shifting its focus from developing scale to quality,” it said (link in Chinese).
Policymakers have become increasingly concerned about potential financial risks in the trust sector, which plays an important role in shadow banking by providing loans to higher-risk companies and those having difficulty getting credit from traditional banks.
In 2019, nearly one-third of the 68 trust companies were punished by regulators for a wide range of violations, including conducting illicit off-balance-sheet lending and making illegal real estate investments.
At the end of March this year, China’s trust industry had 1,626 “risky” projects, a surge of 61.6% year-on-year, according to the China Trustee Association. It has not disclosed newer figures.
In the third quarter, profits of the 68 trust companies fell 21.4% year-on-year to 14.5 billion yuan, steeper than a 7.9% year-on-year decline in the second quarter and a 10.2% decrease in the first quarter, the data showed.
Contact reporter Tang Ziyi (firstname.lastname@example.org)
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