Chinese trust companies may overtake the insurance industry by the end of 2012 and become the second largest sector in China's financial services market, but some trust companies should pay attention to credit risk, said a recent KPMG report.

According to the report, by the first quarter of 2012, trust companies were managing assets totaling more than 5.3 trillion yuan ($841 billion).

In 2011, Chinese trust companies showed consistent growth, with a 58.3 percent year-on-year increase of assets under management.

The asset scale of the Chinese insurance sector totaled 6.8 trillion yuan by the second quarter of this year, according to China Economic Net.

"We forecast that the assets under management of the Chinese trust sector will be between 6 trillion to 7 trillion yuan by the end of this year," Jason Bedford, a senior manager of financial services at KPMG and chief author of the report, told China Daily.

According to Bedford, trust companies should pay attention to risks. The registered capital amounts of some companies are small and they may not be able to pay their clients if their businesses suffer losses. So increasing registered capitals and improving their risk control systems is important, he said.

The report said that the trust sector is moving into a more mature phase of its development, while in the past the sector was notable for a lack of bottlenecks on both the investors and project side.

However, the situation is changing due to increased competition. For example, securities firms are increasing their wealth management abilities.