An embattled Chinese shadow bank has taken a step closer to receiving potential state-led assistance, entering a partnership agreement with two of the nation’s biggest financial firms.
About a month after Zhongrong International Trust Co. missed payments on scores of investment products, roiling markets, it’s now signed an agreement with Citic Trust Co., a unit of conglomerate Citic Group Corp., and CCB Trust Co., backed by China Construction Bank Corp., the firm said in a statement Friday night.
China’s government specifically asked Citic Trust and CCB Trust to examine Zhongrong’s books and lead the effort to stabilize its operations, Bloomberg News reported last month.Publicly acknowledging its troubles, Zhongrong, said Friday that it’s been unable to make payments as scheduled on some products. It blamed unspecified “multiple internal and external factors.”
China’s trust industry is a key alternative funding source for weaker borrowers unable to get regular bank loans such as real estate developers and local government financing vehicles. Trusts pool money from clients and invest them into a variety of instruments and projects. Friday’s statement said that Zhongrong’s debt relationships and legal relationships in relation to trust products won’t be changed by the new pact with the two state-owned firms.
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