As the New Year dawns in 2025, the atmosphere is thick with the lingering effects of the holiday seasonOne individual, who we will refer to as Chen Hui, finds himself adjusting to the pace of a new work yearLeaning against a conference room chair, he appears weary, caught in a contemplative moment filled with uncertainty.

The year 2024 has been a tumultuous one for Chen and the trust industry in which he worksHe has witnessed his peers struggle under the weight of unresolved business risks and the shrinking networks within the industryColleagues have departed, and friends have chosen to leave this field altogetherThose who continue to persevere, like Chen, have begun to feel a distinct shift in the landscape of trust management.

The trust sector underwent significant transformations throughout the past year

On one side of the equation, several notable firms were caught up in crises, culminating in situations such as Minsheng Trust being "held" under administration, Huarong Trust restructuring its equity, and both Sichuan Trust and Zhongrong Trust entering bankruptcy proceedingsOn the other hand, trust firms, guided by the newly implemented regulatory framework, began refocusing their effortsThey aimed to expand their presence in asset service trusts, bolster their asset management capabilities, and refine their philanthropic endeavors, ultimately leading to a peak in total asset size for the industry.

Despite this progress, the trust industry’s journey of transformation has brought forth its own set of challengesAlthough strides have been made, particularly in the area of asset service trusts, weaknesses remain starkly visibleThe competitiveness of asset management trusts is lacking, philanthropic business models appear vague, and a hefty burden of historical liabilities lingers, creating barriers that some companies struggle to overcome

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Looking ahead from the vantage point of 2025, trust firms must double down on their roles as trustees, capitalizing on their unique backgrounds and resources to carve out distinct pathways towards compliant and differentiated development.

In the ongoing quest to clear legacy risks, newer developments have only added fuel to the fire.

By 2024, the first gusts of trouble began sweeping through the industry as companies listed on the A-share market were implicated in trust product failuresAmong those affected were Zhongrong Trust, Xuecong Trust, Minsheng Trust, Sichuan Trust, Wanxiang Trust, Ping An Trust, and Wuhuan TrustThis situation left numerous investors, such as a participant we shall call Song Yu, reeling from lossesA seasoned investor, Song found himself ensnared in the web of trust products that started to falter.

At the start of 2025, Song relocated from his villa's basement meeting room to a newly refurbished glass conservatory on his estate, puffing on one cigarette after another as he detailed the "crimes" of Zhongrong Trust.

Recently, Zhongrong Trust has been marked by additional bankruptcy restructuring news, driven by petitions from both state-appointed managers and Qinghai Youth Mining Co., with cases funneled through the Qinghai Provincial Higher People's Court

Zhongrong Trust’s situation echoed the struggles faced by other firms, positioning it as the third trust company to enter bankruptcy proceedings, following moves made previously by Xinhua Trust and Sichuan Trust.

On April 7, 2024, Sichuan Trust sought restructuring through the Chengdu Intermediate People's Court, highlighting its inability to fulfill matured debts due to asset shortfallsThe court’s endorsement of this request came on April 23, as a restructuring plan took effect.

In addition to these high-profile bankruptcies, numerous other trust companies made strides toward addressing their risk exposures throughout 2024. In April, Minsheng Trust announced that it had entered into an operational management agreement with CITIC Trust and Huarong Trust, along the lines of restructuring efforts aimed at achieving better operational performance

Following its own equity restructuring, Huarong Trust rebranded itself as Xingbao International Trust Limited in September, strategically aligning itself for new growth.

According to Associate Researcher Wang Peng from the Beijing Academy of Social Sciences, methods employed for risk resolution in these financial institutions will increasingly trend towards market-oriented and legal-based frameworksMajor strategies within the trust industry have been focused on strengthening compliance, mitigating undue influences from shareholders, and initiating restructurings for high-risk firms, all of which are intended to safeguard both financial stability and investor interests.

Through a rigorous pattern of enforcement, penalties have become commonplace in this industry.

One outcome of the ongoing push to purge risks is the regular imposition of fines on trust institutions

In the prior year, regulatory authorities issued a total of 15 penalties against 13 trust companies, amounting to over 30 million yuan in finesHigh-value penalties, particularly those reaching into the millions, have become increasingly prevalentFor example, Guangdong Yuetai Trust faced a fine of 6.2 million yuan, while Guotong Trust was sanctioned for 13 specific violations, accruing a penalty of 5.85 million yuan, which included warnings for 18 responsible individuals.

Recent developments in regulatory enforcement indicate a trend where hefty fines are not only common but are often mirrored by the punishment of responsible managersA striking example occurred on July 3, 2024, where Liang Qingde, the former deputy general manager of Anxin Trust, was barred from the financial sector for 15 years due to various misconducts linked to improper asset usage.

According to financial analyst Shuai Guo Ruan, the stringent regulatory environment surrounding trust companies does not appear to be waning

The expectation is that a dual-penalization system will prevail, where penalties for single entities will increase alongside rising punitive measures for individuals linked to the misconduct.

Liao Hekai, an analyst from Jinle Function, emphasizes that in the current regulatory climate, there is a clear escalation in the scrutiny of operational complianceHe suggests that trust companies engage in transparent documentation and thorough due diligence across all business operations to uphold their responsibilities and obligations as trustees.

The frequent turnover in executive roles at trust firms adds another layer of complexity to the industry's evolving dynamics.

This swift change tends to reflect an ongoing shift towards new operational modes and strategiesA review of official data from the National Financial Regulatory Administration reveals that in 2024, 22 executives from various trust companies received approvals for their positions, demonstrating a noteworthy trend of executive swaps, especially in firms like Ping An Trust and Hunan Caixin Trust, where both CEO and Chairman positions saw turnover.

Overall, more than 20 trust firms witnessed significant alterations at the executive level in 2024. Notably, companies such as China Resources ShenGuo Trust, Shaanxi International Trust, and several others appointed new leadership for various roles, indicating a broader industry trend towards refreshing executive management.

With the implementation of new regulatory frameworks, Liao highlights how trust firms are experiencing a meaningful change in their operational approaches, as they increasingly focus on asset management strategies as a primary revenue source

This shift comes with underlying challenges, compelling firms to manage historical issues while adapting to modern standards necessitating skilled personnel capable of addressing the evolving market environment.

As the trust industry navigates these turbulent waters, it remains clear that new opportunities are emerging, particularly in the domains of asset service trustsChen Hui holds firm in his belief that the trust sector has the potential to significantly contribute to the growth of the real economyWith the ongoing development and implementation of the three-tier classification regulation, there are clear pathways for growth in asset service trusts, asset management trusts, and charitable trusts.

According to the China Trust Industry Association, the industry continues to grow, with the total trust asset value reaching a historic high of 27 trillion yuan by mid-2024. The upcoming annual meeting echoed this, revealing that the asset service trusts have expanded to nearly 11 trillion yuan, accounting for an impressive 40% of the sector, outpacing asset management trusts in both product numbers and newly-added assets.

As the trust industry embraces this shift towards enhanced capacity for asset service, it also grapples with the reality of operational pressures, with income and profit totals reflecting declines

In the first half of 2024, the industry recognized revenues of approximately 33.25 billion yuan, indicating a 32.73% drop compared to the previous year, while profit totaled about 19.59 billion yuan, down by 40.63% year-on-year.

Professor Li Nan from Shanghai Jiao Tong University's Institute of Financial Studies suggests that trust firms struggling with legacy debts and investment failures must prioritize resolving these outstanding asset issuesThose without such historical burdens are encouraged to focus on regulatory compliance, identify targeted client demographics, and design competitive offerings within the three-tier regulatory framework to ensure ongoing market viability.

Shuai Guo Ruan observes that the mounting pressures on trust firms' performances stem largely from the combined effects of a complex economic environment and tough regulatory policies