With $660bn of Chinese trust loans falling due this year, the increasingly troubled sector looks set to pose one of the stiffest tests yet for policy makers in the world’s second-biggest economy.
Trust loans, which are typically two years in duration, make up the largest slice of China’s vast shadow banking sector. Together with shorter-term wealth management products, shadow financing rose to account for over a third of new credit in the country in 2013.
Such loans have become vital to the Chinese economy. They are often used to fund infrastructure projects or property development, and by banks to eliminate assets from their balance sheets so that they can extend credit elsewhere. Trusts currently have around Rmb7tn ($1.2tn) in assets, up from just Rmb2tn three years ago.