New Laws Needed To Help China’s Trust Industry, Say Experts

by Mary Swire, Tax-News.com, Hong Kong

28 October 2004

Academics and industry experts are calling on the Chinese government to improve the legal and market environment surrounding trusts in order to promote growth in the sector, China Daily has reported.

After speaking at China's first Trust International Symposium earlier this month, one such expert, Jiang Ping, a legal expert and lifelong professor of the China University of Political Science and Law, remarked that changes to China’s trust regulations were “urgently needed.”

Areas where experts acknowledge improvements could be made include the legal framework supporting the Chinese trust sector, especially regarding tax, accounting and business registrations, and the overall credit system.

Meanwhile, Xia Bin, dean of the Institute of Financial Research of the Economic Research Centre of the State Council, has argued that trust companies must not be regulated in the same way as the banking sector.

This is a view shared by Zhu Yaobin, deputy General Manager of Hongtai Trust & Investment Co Ltd, who, according to the report, noted that “government should differentiate supervision measures on trust companies and banks as they differ to a large extent."

Furthermore, many observe that restrictions on fund raising and promotion are stifling growth in the trust industry as it is not permitted to float bonds and advertise them in the media.

However, experts are optimistic over the industry’s future in China.

"Pension fund and real estate financing will be future star trust products, and enjoy a huge potential market," forecasts Jiang.

China currently has 59 trust companies after a major reorganisation of the industry two years ago. Total trust assets are worth 200 billion yuan (US$24.1 billion).

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