In Depth: China Intensifies Efforts to Curb Risk in Troubled Trust Sector

As well as increasing the focus on risk control and services such as wealth management, new regulations aim to discourage trusts from acting as conduits for shady investments

China’s regulators have been working for years to overhaul the country’s troubled trust industry, which has been hit by scandal, fraud and defaults on investment products.

Profitability is out and risk management is in. That’s the message in the latest set of regulations for China’s trust companies aimed at controlling a 22.6 trillion yuan ($3.1 trillion) industry that continues to be beset by scandals after a years-long overhaul.

The rules, which replace regulations introduced in 2016, went into effect in November and put greater emphasis on risk prevention, encouraging trust firms to focus on providing wealth management services rather than acting as financing channels, experts and industry sources said. They also aim to limit the development of problematic trust firms by implementing differentiated supervision.