Chinese Trust Companies on the Brink

China's three trillion dollar trust industry could be on the brink of collapse, with sources telling Asia Markets a catastrophic wave of Chinese trust company bankruptcies is likely in the coming months. "The large trust companies invest on behalf of some of the wealthiest Chinese families and largest corporations and their staff, so what we're about to see could be certainly bigger than Evergrande, in term of the ramifications within China," the Hong Kong-based source said. In August 2022, as the Evergrande crisis unfolded, China's National Audit Office announced it had undertaken surprise audits of at least 20 trust firms. It has since been revealed that at least two Chinese trust companies, including MinMetals Trust Company and the Zhongrong Trust Company purchased stakes in 10 troubled real estate projects during 2022, despite the warnings from regulators. State media recently revealed a state-owned bailout venture known as the China Trust Protection Fund has been set up to acquire risky assets from trust companies. It comes as the New China Trust Company was declared bankrupt in May this year. It marked the first Chinese trust company bankruptcy in over two decades.