By Chang Yanjun
According to statistics of the trust industry in the first quarter of 2012 published by China Trustee Association recently, the volume of trust assets of the entire trust industry amounted to RMB 5.3 trillion Yuan, a growth of 10.19 percent over the RMB 4.81 trillion Yuan at the end of last year.
Hu Jianzhong, a researcher in Central University of Finance and Economics, suggests that the trust industry adds more than RMB 490 billion of trust assets in the first quarter of this year, a result of its continuously increasing social recognition after years of industrial consolidation. Some other important reasons include limited investment channels for high net worth clients in society and thriving capital demands on the economic level. "This kind of growth may become normality. It may not be long for the volume of trust assets of the trust industry to exceed RMB 6 trillion Yuan, making it the second largest financial sector after only banking".
Such statistics are indeed eye-catching, but what lies behind the rapid development of the trust industry is not ideal. In its extensive growth, the image of the trust industry is not very good; while the volume of the industry is undergoing massive changes, there are doubts about the authenticity of such growth and the industry's capability to manage such huge assets.
Two main cornerstones that underpin the development of the trust industry
According to statistics, of the trust industry's RMB 5.3 trillion Yuan trust assets, RMB 1.5 trillion Yuan is assembled funds trust balance, accounting for 28.29 percent of total trust assets in the same period; RMB 3.6 trillion Yuan is single fund trust balance, accounting for 67.95 percent; and RMB 199.478 billion Yuan is assets management trust balance, accounting for 3.76 percent.
Single fund trust accounts for more than a half of trust assets. Bank-trust cooperation had once been dominating single fund trust, and served as the propeller for the rapid development of trust assets in a certain period of time. However, the "barbarian" growth of the extensively developing bank-trust cooperation business was curtailed by stringent regulation by relevant government departments. Bank-trust cooperation, which once contributed over 50 percent to trust assets, accounted for 33.83 percent of trust assets in the first quarter of this year, and accounted for 49.72 percent of single fund trust.
"After 2011, the growth of the trust industry has been gradually breaking away from the support of bank-trust cooperation. The driving force has been replaced by new trust clients that the trust industry has vigorously cultivated in compliance with the government's policies", said Zhou Xiaoming, director of the Trust and Funds Research Institute of Renmin University of China. Mr. Zhou suggests that single big clients (including institutions and high net worth individuals) from non-banking sectors have become dominant in single fund trust, and the development of the trust industry has entered the era of quality "big clients".
Since the implementation of the Trust Companies Administration Measures and the Administration Measures of Assembled Funds Trust Programs of Trust Companies in 2007, assembled funds trust, led by qualified individual investors, has been developing rapidly. In the first quarter of 2010, the volume of assembled funds trust accounted for only 12.57 percent of that of trust assets in the same period, and the number in the first quarter of this year was as high as 28.29 percent.
According to Zhou Xiaoming, the growth of the trust market that is led by the trust needs of big clients and the sustainable development of the trust market that is led by the trust financial management needs of qualified individual investors are the two cornerstones that underpin the rapid development of China's trust industry.
Most trust capital flows to the real economy
In terms of featured business, the balance of bank-trust cooperating business, which receives plenty of attention, has somewhat increased, but its proportion has decreased from 34.73 percent at the end of the fourth quarter of 2011 to 33.83 percent in the first quarter of 2012. Besides, except for decreases of the balances of trust-government business and QDII business compared with that of last quarter, balances of other business, such as private funds cooperation and PE, have all increased to various extents.
As for the investment destination of trust capital, RMB 1.12 trillion Yuan of trust capital goes to infrastructure industries, RMB 686.57 billion Yuan goes to the real estate sector, RMB 459.631 billion Yuan goes to the securities market (including stocks, funds, and bonds), RMB 708.152 billion Yuan goes to financial institutions, RMB 1.1 trillion Yuan goes to industrial and commercial enterprises, and RMB 1.03 trillion Yuan goes to other areas.
Hu Jianzhong says that the proportions of investment in infrastructure industries and industrial and commercial enterprises are relatively higher. It is a sign that trust capital tends to flow to the real economy. "Currently, the risk resistance capability and profit ability of the trust industry are improving".
It is noteworthy that, under the influence of such factors as stringent control by regulatory authority and active adjustment by the trust industry, the absolute amount of real estate trust witnessed negative growth for the first time in the first quarter of 2012, real estate balance dropping by RMB 1.661 billion Yuan from the RMB 688.231 billion Yuan at the end of last year.
"2012 and 2013 is a period for the concentrated redemption of real estate trust. There will be periodic and liquid risks. Nonetheless, most trust companies are operating rather steadily and robustly, and they are adopting active measures to fend off possible liquid risks", says Hu Jianzhong, who also points out that from the perspective of the industry the chance of breach of contract, or the periodic and liquid risks may exist, but the risk of causing loss is very small. This is a result of the improvement of the trust industry as a whole. "The trust industry is playing by the rules, and is becoming a ‘good boy'".
