The involvement of two Chinese state-owned financial firms in Zhongrong International Trust Co's operations and management may diffuse risk at the troubled shadow bank but does little to ease concerns about missed payments, analysts and investors said. The shadow bank, which traditionally had sizable real estate exposure, missed payments on dozens of so-called trust products since late July, roiling markets and raising fears that China's financial system may be at risk from the property sector crisis. Angry retail investors in Zhongrong's trust products last month held protests in Beijing and lodged complaint letters with regulators, pleading with the authorities to step in after the missed payments.
BEIJING - The involvement of two Chinese state-owned financial firms in Zhongrong International Trust Co's operations and management may diffuse risk at the troubled shadow bank but does little to ease concerns about missed payments, analysts and investors said.
Zhongrong said in a statement late on Friday it had signed an agreement with Citic Trust and CCB Trust - the shadow banking arms of two state-owned firms Citic Group and China Construction Bank - for so-called "entrusted management services". The latest development was a standard procedure used by Beijing to diffuse risks at troubled shadow banks in recent years, said a senior executive at a Beijing-based research firm, who declined to be named due to sensitivity of the matter.
Zhongrong, the National Financial Regulatory Administration , the country's new financial regulator, and the People's Bank of China did not immediately respond to Reuters request for comment.Concerns about the outsized exposure of China's $3 trillion shadow banking sector, roughly the size of Britain's economy, to property developers and the wider economy, have grown over the past year as the sector lurched from one crisis to another.
Zhongrong managed assets worth 785.7 billion yuan at the end of 2022, out of which 629.3 billion yuan were linked to trust products, according to its latest annual report.
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