China continues to open up its financial sector for foreign participation, this time through the easing of its $3 trillion trust industry.
The China Banking and Insurance Regulatory Commission released draft revisions, including the removal of a requirement for foreign firms to have a minimum of $1 billion in assets before investing in trust companies. Other revisions included the removal of articles governing the sale of bonds and subordinated bonds by trust companies.
Regulatory easing for trust companies is occurring in the midst of ongoing opening up of the broader financial sector. China has been increasingly removing restrictions for foreign access to industries such as futures, securities and asset management.
Limited Demand for Trust
As of 2019-end, China’s 68 trust companies had a total of 21.6 trillion yuan ($3 trillion) in assets, a 4.85 percent year-on-year drop. Despite the sizeable asset pool, there has been limited reported interest thus far a market that has been a key channel for the country’s risky shadow banking system.
Currently, just 7 of the 68 companies have foreign investors are minority shareholders such as Sumitomo Mitsui Trust Bank, Bank of East Asia, Bank of Montreal and J.P. Morgan.
