In the year of 2016, the Chinese economy developed in a mild and steady way, and the supply-side reform continued advancing. The policy effect of five priority tasks -- cutting overcapacity, reducing excess inventory, deleveraging, lowering costs, and strengthening areas of weakness was enormous. Calculated according to constant price, GDP reached 74.4 trillion Yuan, representing 6.7% growth.

According to the major business indicators of the trust companies released by China Trustee Association, the trust industry proactively promoted its own supply-side structural reform, speeded up the transformation process, enhanced risk management, explored growing momentum, reconstructed business model and maintained sustainable growth of the industry. In the year of 2016, the assets of the industry totaled more than 20 trillion Yuan, entering a new era of development. The trust industry plays important role in the whole financial sector, in terms of serving the real economy and creating wealth for the national citizen. 

I. Steady Growth of the trust industry: a new era of 20 Trillion in 2016 

A.The trust asset

As of 2016, the trust assets under the management of 68 trust companies reached 20.2 trillion Yuan, with a y-o-y growth rate of 24%. The assets arrived at 18 trillion Yuan at the end of the previous quarter, recording a quarterly growth rate of 11.3%

In terms of sources of funds, the balance of single pecuniary trusts totaled 10.1 trillion Yuan, accounting for slightly more than half of the total.

Compared with the previous quarter, the share declined significantly. Through out 2016, the share of single pecuniary trusts appeared a clear downward trend. The balance of collective pecuniary trusts totaled 7.3 trillion Yuan, accounting for 36.3% of total funding. Compared with the previous quarter, the share increased by 1.5 percentage points. The share of collective pecuniary trusts fluctuated but increased steadily. The balance of property trusts totaled 2.8 trillion Yuan, accounting for 13.7% of the total, which represented a mild increase on a quarterly basis. The balance of collective pecuniary trusts together with the property trusts accounted for nearly half of the total, showing a strong trend of funding diversity and business structure improvement. 

In terms of functions of funds, the balance of non-discretionary trusts totaled 10.1 trillion Yuan (49.8% of the total). Compared with the previous quarter, the amount and the share of non-discretionary trusts increased by 1.8 trillion Yuan and 4.1 percentage points respectively, showing a trend of steady growth. The balance of non-discretionary trusts totaled 5.99 trillion Yuan (29.5% of the total). Compared with the previous quarter, the amount increased by 141.7 billion Yuan while the share dropped by 2.6 percentage points. The balance of financing trusts totaled 4.2 trillion (20.6% of the total). Compared with the previous quarter, the amount increased by 145.8 billion Yuan while the share dropped by 1.5 percentage points. The structure of the investment trusts, the financing trusts and the non-discretionary trusts accounting for one third of the total was further changed, and the growth rate of the non-discretionary trusts was clearly faster than the other two categories.

B.Proprietary assets and equity

Proprietary assets demonstrate trust companies’ capability of active management of assets. As of 2016, the proprietary assets totaled 557 billion, increased by 20.5% compared with that of the end of 2015 (462 billion Yuan). Investment assets are always one of the major forms of proprietary assets. The investment assets in the four quarters of the 2016 were as follows: 334 billion Yuan in the first quarter, accounting for 74.5% of the total; 358 billion Yuan in the second quarter, accounting for 73.3% of the total; 376 billion Yuan in the third quarter, accounting for 74.7% of the total; 414 billion Yuan in the fourth quarter, accounting for 74.3%. 

As of 2016, the assets of loans totaled 29 billion Yuan, which decreased by 15.8% y-o-y and decreased by 8.3% on a quarterly basis. The monetary assets totaled 68 billion Yuan, which decreased by 5.6% compared with that of the end of 2015 (72.5 billion Yuan) and increased by 40.7% compared with the previous quarter (48.7 billion Yuan). As of 2016, the owner's equity of the trust industry amounted to 450.2 billion Yuan, which increased by 17.9% y-o-y (381.9 billion Yuan at the end of 2015), and increased by 9% on a quarterly basis ( 413 billion Yuan at the end of the third quarter).

In terms of components of net assets, the paid-up capital amounted to 203.8 billion Yuan as of 2016, and the trust compensation provision amounted to 18.7 billion Yuan, which increased by 14.4% on a quarterly basis and increased by 18.8% y-o-y.

C. Projects at risk and the amount

As of 2016, 545 projects of the industry were at risks and this number was 61 less than that of the previous quarter. The balance of projects at risks was 117.5 billion Yuan, among which collective pecuniary trusts accounted for 51.1% (60 billion Yuan), single pecuniary trusts accounted for 47.4% (56 billion Yuan), and property trusts accounted for 1.5% ( 1.8 billion Yuan). 

II. Smooth improvement: business performance paced into a period of steady growth in 2016

A.Business performance

Firstly, Business income dropped y-o-y. As of 2016, the income of the trust industry amounted to 112 billion Yuan, which represented a drop of 5.1% compared with that of the end of 2015 (118 billion Yuan). 

Secondly, the total profits kept growing. As of 2016, the industry profits amounted to 77.2 billion Yuan, which represented an increase of 2.8% compared with that of the end of 2015 (75.1 billion Yuan).

Thirdly, profits of per staff member. Profits of per staff member dropped from 3.20 million Yuan in 2015 to 3.16 million Yuan in 2016, which recorded a decrease of 1.2% y-o-y. 

B. Performance as trustees

In December of 2016, 1882 trust projects were liquidated, and the average annualized rate of fees to trustees was 0.73%, slightly higher than that of December of 2015 (0.53%). The average annualized fee rate in the other three quarters was 0.50% in March, 0.50% in June and 0.58% in September respectively. The real annualized return rate for beneficiaries was 8.18% in March, 6.35% in June ,7.59% in September and 7.60% in December. In 2015, the real annualized return rate for beneficiaries was 8.11% in March, 10.19% in June, 7.30% in September and 13.96% in December. Obviously, the annual return rate was declining as a whole in 2016. 

III.Serving the real economy: the value and institutional advantage of the trust industry manifested in 2016

In 2016, the trust assets were invested into five major areas, including industrial and commercial enterprises, infrastructure, securities market, financial institutions and real estate market.

A. Industrial and commercial enterprises

As of 2016, financing to industrial and commercial enterprises totaled 4.3 trillion Yuan, accounting for the largest share of pecuniary trust (24.8%).

B.Financial institutions

As of 2016, financing to financial industry totaled 3.6 trillion Yuan, accounting for the second largest share of pecuniary trust (20.7%).

C.Investment in securities market

As of 2016, financing to securities market totaled 2.8 trillion Yuan, accounting for the third largest share of pecuniary trusts (20.7%), which dropped by 5.4% compared with the fourth quarter of 2015. 

D.Infrastructure

As of 2016, financing to infrastructure totaled 2.7 trillion Yuan, accounting for 15.6% of the pecuniary trust, and the share was dropped to the fourth position.

E. Real estate market

As of 2016, financing to real estate market was still in the fifth position. It totaled 1.4 trillion Yuan, accounting for 8.2% of pecuniary trusts. The share dropped by 0.6 percentage point from 8.8% in the fourth quarter of 2015. The share of real restate financing was decreasing through out 2016, which could be largely attributed to macro adjustments of the real estate market.   

IV. Returning to the origin: an outlook of the development of the trust industry in 2017

The supply-side reform will continue advancing in 2017, and the year of 2017 will be strategically important in the 13th Five-Year Plan. Cutting and restructuring overcapacity in industry chain will be of vital importance to improve social resource allocation and production efficiency. Against this background, in 2017, following trends will be displayed in the development of the trust industry. 

A.The pressure on industry’s transformation will be mounting

With the growth of trust assets, risks are accumulating simultaneously. In 2017, the trust industry will focus more on risk control and regulation. Considering that the amount of trust assets is already very large, the growth rate of the trust industry will slow down in 2017.

From the perspective of assets management market, the competition is becoming even fiercer. The market share of the trust industry will be shrinking, and the growth rate of the trust companies will also slow down. The trust industry will be confronted with the pressure of further transformation.

B. Sectors supported by trust assets will be expanding

In 2017, trust assets will be allocated both in the traditional investment sectors and emerging sectors. In the traditional investment sectors, due to the influence of macroeconomic fundamentals and macro adjustments in real estate market, the financing to the securities and real estate market will further decrease, exactly as what happened in 2016. However, in the field of M&A and PPP, the investment of trust assets will continue growing. In emerging sectors, with the guidance and support of policies, consumption trusts, charity trusts and green trusts will be expected to speed up growing in 2017.

C.Innovation of trust business will speed up

With the fast growing of individual wealth and the trial replacement of business tax with value added tax (VAT), property trusts and non-discretionary trusts will have broader development opportunity in 2017. With the guidance of returning to the origin of trust business, the market share of both property trusts and non-discretionary trusts will increase. However, financing trusts will be facing more uncertainties, and trust companies will be expected to handle this problem through product innovations. On one hand, trust companies will strengthen innovations in equity-loan-combined investment. On the other hand, assets securitization will be an effective way of technical innovation for trust companies. In 2017, when the China Trustee Registration Company officially starts its business, liquidity of trust assets will be improved.

Furthermore, with the aging of population, transformation of industry structure and the change of consumption model, the trust industry will be able to expand its business to new fields including the elderly services, tourism and online shopping.

D.Regulation rules governing trust industry will be more deepened

The trust business will be classified into eight categories. The new classification shows that apart from taking care of credit risk, trust companies shall also take care of market risk, compliance risk and strategic risk. It demonstrates complexity of risk control in the industry. Consequently, the regulation rules of the trust industry will be deepened.

Firstly, in terms of industry regulation, the CBRC has released Guidance On Enhancing Risk Supervision Of The Trust Company, Guidance on Comprehensive risk management of the banking industry. The CBRC emphasized on enhancing material risk mitigation, liquidating non-standard funding pool and strengthening capital management, with aims to sticking to the minimum requirements of capitals and promoting healthy development of trust industry.

Secondly, with the formation of the trust industry rating system and supervisory rating system, the risk control, assets quality and compliance are included in the supervisory framework.

Thirdly, the establishment of the China Trustee Registration Company marked the completion of the so-called “one body and three wings” supervisory framework. A unified registration and transfer platform of trust products will contribute to healthy development of the industry.

The establishment of a mega data platform of the trust industry and the completion of the system will enable the supervisor to take a more flexible approach in supervision. Dynamic adjustments of rate charging by the China Trust Protection Fund will become normal.