Special Feature: CITIC Trust
Chinese trusts are like none other. Historically, in international markets trust services were designed to provide trustees with risk isolation, tax optimisation and asset longevity. The most common application of these services has been cross-generational wealth transfer for wealthy families and foundations. In China, however, the industry took a distinctly different development path — one grounded in its economic growth story and built around the particular regulatory context of China’s broader financial system. Most Chinese investors aim to maintain and increase the value of their assets by investing in trust products. From the corporate perspective, trust is a pipeline of direct financing through debt and equity instruments for organic growth or M&A.
The establishment of China International Trust and Investment Corporation in 1979, the predecessor of CITIC Limited, marked the beginning of the trust industry in China. By the early 1990s, trust companies in China numbered in the thousands. However, in those early years the market’s immaturity and relatively undeveloped regulatory framework resulted in a structural bottleneck that affected the entire industry.
In 2001, a mature regulatory framework for trust law was introduced to establish standards for market access, investment scope and operating guidelines. Given the new and stricter criteria for receiving trust business licences, the small and less professionalised trust companies began to disappear from the market, leaving only the largest and strongest in their wake. In the years since, the fortunes of trust businesses have risen significantly, attracting major investment by high net worth individuals and institutional investors and laying a solid foundation for the industry’s sustained and healthy development. Today, the trust industry is a pillar of China’s modern financial system. Its AUM has reached over RMB20 trillion, exceeding securities and insurance to become the second largest financial industry. Trusts have matured as a distinct class of investment and wealth management services to become a core engine driving innovation throughout the entire financial sector and the development of the real economy.
What has driven the success of the broader trust industry in past decades has been their unique ability to connect assets with investors across various financial markets, unencumbered by the specific financial constraints of other financial market players, particularly in investment scope and asset allocation. Although they do not enjoy dominance over any one subsector in the broader financial services industry, their ability to create innovative solutions has allowed them to maintain their leadership.
It is in this aspect that CITIC Trust excels. The company has grown from one of the first trust companies in China into one of the largest today, with registered capital of RMB10 billion, total assets of RMB27.9 billion, and AUM of more than RMB1.7 trillion. Not only is the company’s heritage rooted in the very foundation of the industry, it continues to lead its evolution today, as evidenced by its comprehensive family of products. In 2010, the company established the largest charity trust in China in collaboration with China Development Bank and China Merchants Bank. It was among the first Chinese trust companies to receive approval for asset securitisation in 2013, the same year it began to sign land circulation trust products. By 2016, the size of its asset securitisation business exceeded RMB230 billion, ranking it first within the trust industry. And in 2014, CITIC Trust launched the first online consumer trust product with Baidu and, in 2015, the first family office in the trust industry. Most recently, in 2016 the company introduced a new brand — CITIC Family Trust — and launched its first cross-border employee stock ownership trust in China. It was also nominated as the fund manager for Guizhou Province’s PPP Fund, with a fund size of RMB10 billion.
Today, the company continues to move beyond its historical roots in financing, investment and wealth management services and has advanced into professional services, including integrated advisory service to meet the investment, taxation and legal needs of clients.