CICC tipped to acquire stake in Chinese trust company

CICC will take a 35% interest in Hangzhou-based Zheshang Trust and have management control, with a unit of the Zhejiang provincial government retaining majority ownership.

Trust companies have an unusually wide remit in China's financial services sector. They first rose to prominence in the 1990s, acting as investment vehicles for government projects. After a many of these projects went sour, the trust industry was more or less mothballed and only rehabilitated in 2007. It was decided that these companies could serve as wealth management institutions and some have an unusually wide remit, holding licenses to do everything from banking to broking to private equity.

Partly due to the breadth of their coverage, trust companies have to a certain extent slipped through the regulatory net. The 65 trusts currently in operation posted average profit per person of around RMB2.6 million ($403,000) last year, the highest in the financial sector, according to KPMG. Assets under management increased more than 50% to RMB3.1 trillion as demand for their products soared.

In the past few years, financial products created by trust companies have helped local governments raise money to support stimulus efforts and been used to shift large amounts of debt off the balance sheets of local banks (although the government subsequently ordered that it be reinstated). The banking regulator has also started to rein in the industry by imposing stiffer capital requirements.

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• Topics
• Greater China
• Financials
• TPG Capital
• CICC
• KKR