China bans guaranteed returns on trust products from January
China's financial regulator has issued new rules banning trust firms from promising principal protection or minimum returns, and from setting expected returns. The rules, effective January, also impose concentration limits and prohibit certain business practices.
China's National Financial Regulatory Administration has issued new rules on asset management trusts, banning trust companies from promising investors that their principal will not be lost, guaranteeing minimum returns, or setting expected returns on trust products. The regulations will take effect in January 2027.
The regulator has also prohibited trust firms from conducting illegal pass-through business or operating cash-pooling activities. Trust companies are required to manage each trust product separately, maintain separate accounts and conduct separate accounting. They are forbidden from conducting investment banking services under the guise of trust products to raise funds for borrowers.
The new rules impose investment concentration limits. For a single trust product, direct investment in the same asset or investment in the same asset management product must not exceed 25 per cent of the trust product's net assets.
For a single trust company, the total amount invested in the same asset across all its trust products must not exceed 30 billion yuan (US$4.1 billion). In addition, all trust products managed by a single trust company may not hold more than 30 per cent of the tradable shares of a single listed company.