‍‍I‍‍n‍‍ the first quarter of 2017, China’s GDP increased by 6.9% y-o-y, representing a mild increase compared with the fourth quarter of 2016, and the economy operated in a favorable way. Among the industries, added values increase by 3.0% y-o-y for the primary industry, 6.4% y-o-y for the secondary industry, and 7.7% y-o-y for the tertiary. As the continuous promotion of supply-side structural reform, emerging and service industries have become main momentums of economic growth. The major business indicators of China’s trust companies released by China Trustee Association have shown that the growth rate of trust industry coordinated pace with that of the China’s economy, with a steadily ascending industry performance in the first quarter.

‍‍Meanwhile, accompanied by t‍‍he gradual specification of regulatory rules, more intense intra-industry competition in asset management, and accumulation of risk factors, the trust industry encountered new opportunities and challenges for its development. Trust companies proactively optimized their business structures, returned to the origin as trustees, promoted research and development capabilities, and explored new growing momentum. They utilized operational advantages to offset multiple negative impacts from many aspects, achieved a mild rate of growth in ‍‍‍‍asset under management and enabled further adjustments in income structure.‍‍ ‍‍

‍‍‍‍I. Steady growth in asset under management; stable reinforcement in risk control‍‍‍‍

‍‍‍‍‍‍A. Trust assets‍‍‍‍

‍‍As of 2017 Q1,‍‍ trust assets under management of 68 trust companies reached 21.97 trillion Yuan, with a y-o-y growth rate of 32.48% and a quarterly growth rate of 8.65%. The y-o-y growth rate of the trust assets‍‍ began to recov‍‍er after touching its historical low in 2016 Q2, recording an average 8% quarterly growth rate.

‍‍In terms of sources of funds, starting from 2016 Q2, the share of single pecuniary trusts continued declining, while shares of the collective pecuniary trusts and property trusts increased ste‍‍adily. By the end of the 2017 Q1, the share of single pecuniary trusts decreased by 8.08 percentage points from 56.56% to 48.48%, compared with that of 2016 Q1; the share of collective pecuniary trusts rose by 3.58 percentage points from 33.01% to 36.59%; the share of property trusts rose by 4.5 percentage points from 10.43% to 14.93%. The diversity in sources of trust funds and the equilibrium of shares c‍‍ontributed to optimization of business structure, expansion of customer base, enrichment of product categories and consolidation of long-term development.‍‍‍‍‍‍

‍‍B. Proprietary assets and equity‍‍

‍‍As of 2017 Q1, the proprietary assets in trust industry totaled 557.3 billion Yuan, (8.5 billion Yuan per company on average) with a y-o-y growth rate of 25.26% and a quarterly growth rate of 3.65%, both of which maintain ascending trends. In terms of structure, investment assets remain the major form of proprietary assets, which amounted to 438.2 billion Yuan, and accounting f‍‍or 75.90% of total proprietary assets. Monetary assets amounted to 50.9 billion Yuan, accounting for 8.82% of total. Assets of loans amounted to 31.0 billion Yuan, only accounting for 5.37% of total.‍‍

‍‍As of 2017 Q1, the owner’s equity of the trust industry totaled 469.5 billion Yuan, (6.9 billion Yuan per company on average) with a y-o-y growth rate of 21.64% and a quarterly growth rate ‍‍of 4.30%. In terms of components, paid-in capitals accounted for 46.51% of total owner’s equities, which increased by 2.23% compared with that of 2016 Q1. Undistributed profits accounted for 29.26% of total, ‍‍which declined by 1.51%. Trust compensation provision accounted for 4.16% of total, which roughly remained unchanged.‍‍

‍‍C. Projects at risk‍‍

‍‍As of 2017 Q1, 561 projects of the industry were at risk and this number was 16 more than that of the previous quarter. The balance of projects at risk was 122.7 billion Yuan, which increased by 10.52% y-‍‍o-y from 111.0 billion Yuan in 2016 Q1, and increased by 4.39% on a quarterly basis from 117.5 billion Yuan in 2016 Q4. Even though the number and balance of projects at risk appeared a clear upward trend, non-performing rate only accounted for 0.56% of 21.97 trillion-Yuan total trust assets, which extended its downward trend since 2016 Q2.‍‍

‍‍II. Business performance declined; major business income boosted further‍‍

‍‍A.Business performance‍‍

‍‍The overall business performance of the trust industry in 2017 Q1 apparently began to fall after its speedy increase on the previous quarter. The income of the trust industry amounted to 21.7 billion Yuan, which represented a 0.84% ‍‍y-o-y increase from 21.5 billion Yuan in 2016 Q1. The profits of the industry amounted to 15.5 billion Yuan, which represented an 11.11% y-o-y increase compared with that of 2016 Q1. ‍‍When compared with the previous quarter, however, the total income dropped by 43.75% and the total profits dropped by 38.63%, which represented a sharp decline partially due to the seasonal effect. According to the historical record, the first and third quarters usually achieved relatively lower business income and profits than the second and fourth quarters, leading to notable fluctuations in the measurement on a quarterly basis. ‍‍

‍‍In terms of components of operating income, the proportion of income from trust businesses continued an upward trend, providing the core momentum for the boosting of operating income. By the end of 2017 Q1, the income of trust businesses amounted to 16.0 billion Yuan, accounted for 17.26% of total income‍‍ and increased by 5.00% y-o-y. Interest income was 1.2 billion Yuan, accounted for only 5.67% of trust businesses income and decreased by 19.78% y-o-y. During the transformation process of the trust industry, the continuous boosting income of trust businesses ‍‍reflected that trust companies were proactively adjusting business structure and returning to the origin as trustees.‍‍

‍‍B. Performance as trustees‍‍‍‍

‍‍In March 2017, 1318 trust projects were liquidated, and the real annualized return rate for beneficiaries was 5.01%, slightly lower than that of the previous quarter. The average annualized rate of fees to trustees was 0.52%, which declined by roughly 0.21% compared with that of the previous quarter. Accompanied by the continuous advancement of the supply-side reform in the China’s economy, traditional economic momentums weakened while new economic momentums were not mature enough. Meanwhile, investment projects in good performance with low risks and high returns appeared scarce, as securities investment trusts which could have achieve high returns showed undesirable outcomes, leading to significant declines in the real annualized return rate for beneficiaries and the average annualized rate of fees to trustees.‍‍

‍‍‍‍III. Functions and investment targets optimized; effects of the reform gradually manifested‍‍

‍‍A. Functions‍‍

‍‍As of 2017 Q1, financing trusts amounted to 4.41 trillion Yuan, accounting for 20.07% of total trust investments, and increased by 7.04% y-o-y from 4.12 trillion Yuan in 2016 Q1; investment trusts amounted ‍‍to 6.08 trillion Yuan, accounting for 27.67% of total, and increased by 10.34% y-o-y from 5.51 trillion Yuan; non-discretionary trusts amounted to 11.48 trillion Yuan, accounting for 52.26% of total, and increased by 65.18% y-o-y from 6.95 trillion Yuan. Among financing trusts, investment trusts and non-discretionary trusts, financing trusts accounted for ‍‍the lowest proportion of the total and had the slowest growth rate; investment trusts had both higher proportion and growth rate than financing trusts; non-discretionary trusts had both the ‍‍highest proportion and growth rate among these three categories of trusts.‍‍

‍‍B. Target markets‍‍

‍‍In terms of target markets, industrial and commercial enterprises remained most attractive, financial institutions at the second place and followed by infrastructure, securities and real estate industry. P‍‍roportions of the five major areas in 2017 Q1 was as followed: industrial and commercial enterprises accounted for 25.28%, financial institutions 19.99%, infrastructure ‍‍15.91%, securit‍‍ies 15.39% and real estate industry 8.43%. Compared with the statistics in 2016 Q4, a change occurred that investments into infrastructure exceeded securities, which further manifested the regulatory guidance that trust industry should serve the real economy.‍‍

‍‍‍‍Industrial and commercial enterprises are always the largest target markets. As of 2017 Q1, investments into industrial and commercial enterprises amounted to 4.72 trillion Yuan, increased by 33.71% y-o-y from 3.53 trillion Yuan, and increased by 9.01% on a quarterly basis from 4.33 trillion Yuan in the previous quarter. It accounted for 25.28% of total, which roughly remained unchanged comp‍‍ared with 2016 Q4.‍‍

‍‍Investments into financial institutions amounted to 3.74 trillion Yuan, which accounted for 25.28% of total, slightly lower compared with that of 2016 Q4. Since financial institutions relied ‍‍on the differentiation in resource endowment, comparative advantages, strategic objectives and market segmentation., the cross-platform communications between each other are expected to be deepened.‍‍

‍‍Investments into infrastructure amo‍‍unted to 2.97 trillion Yuan, which accounted for 15.91% of total. It increased by 10.82% y-o-y from 2.68 trillion Yuan, and increased by 8.79% on a quarterly basis from 2.73 trillion Yuan in 2016 Q4.‍‍‍‍

‍‍Investments into securities market amounted to 2.87 trillion Yuan, which accounted for 15.39% of total, slightly lower compared with that of 2016 Q4. Since 2016 Q1, the proportion of trust funds flow into securities market appeared a clear downward trend; it bounced back slightly in 2016 Q2, but had a limited impact.‍‍

‍‍‍‍Investments in real estate industry amounted to 1.58 trillion Yuan, which accounted for 8.43% of total, slightly higher compared with that of 2016 Q4. It increased by 22.48% y-o-y from 1.29 trillion Yuan, and increased by 10.49% on a quarterly basis from 1.43 trillion Yuan in 2016 Q4.‍‍

‍‍IV. Unceasing innovation to serve real economy; wealth management practices still far from perfection‍‍

‍‍As the continuous promotion of supply-side structural reform, the transformation process of China’s real economy has begun to accelerate. Behind the scenes of 2017 Q1 business performance ‍‍statistics, the trust industry proactively responds to the nation’s major strategies, assists Three Rural Issues, promotes the coordination among regions and between urban and rural areas, and supports the unceasing innovation and dedication of strategic emerging industries.‍‍

‍‍In respec‍‍t of answering the nation’s major strategies and supporting the “One Belt and One Road” Initiatives, Shanxi International Trust Co. took advantage of its geographic advantage on ‍‍the starting point of the “One Belt and One Road”, by providing multiple investment and financing services for infrastructure and key areas, including structural financing, equity investments a‍‍nd industry funds. Yingda International Trust Co., proactively explored the investment and financing platform of energy production, transmission and consumption. Through establishing clean energy, power grid supply chain and the global energy interconnection industry fund, it achieved a full coverage of electricity industry chain, and promoted the implication of the “One Belt and One Road” initiatives.‍‍

‍‍In respect of promoting the agricultural supply-side structural reform, the trust industry proactively answered the call of the nation, promoted the allocation of financial resources toward ‍‍the Three Rural Issues, and assisted the development of the Three Rural issues. In 2017 Q1, trust funds which invested in agriculture, forestry, husbandry and fishery amounted to 116.8 billion Yuan, increased by 15.48% y-o-y. In terms of serving the agricultural development, COFCO Trust Co. relied on the logic of supply chain finance. Through introducing the investment trust of agr‍‍icultural product price index and the farming service integration trust, it fulfilled the updating and upgrading of agricultural services. In terms of enhancing farmers’ living standard, CITIC Trust Co. created the “Agriculture +” one-stop service system and helped boosting farmers’ income, agricultural yield and rural development based on land circulation trust.‍‍

‍‍In respect of promoting the coordination among regions and between urban and rural areas, each trust company stressed financial localization and explored various ways to provide financial services to the‍‍ local economic development, depending on the specialty of different locations and regions. Wanxiang Trust Co. focused on characteristic industry, and cooperated with Anji County government and Anji City Construction Investment Group. It established the white tea industry fund, so as to assist the local characteristic industry of white tea, relying on its ‍‍resource endowment, and fulfilling the object of coordinating development between urban and rural areas.‍‍

‍‍Strategic emerging industries played very important roles in promoting economic growth and adjusting economic structure. AVIC Trust Co. has placed “the Green Trust” as one of its strategic development objectives. Through focusing on emerging industry, new energy industry in particular, it led the transfer of financial resources toward areas of new energy such as energy efficiency and environmental protection, so as to promote China’s “green” economy development. ‍‍‍‍‍‍