General Secretary Xi Jinping makes important judgments in the report of 19th CPC National Congress that the socialism with Chinese characteristics has entered a new era and the principal contradiction facing Chinese society has evolved. He also clarifies the important mission of the financial industry in serving the real economy and guarding against systemic financial risks. In the first three quarters of this year, the trust industry did not forget its initial goals and bore the mission in mind against a background of continued macroeconomic recovery and growth, closely supported the real economy, maintained a steady growth momentum, continuously improved its development benefits, built a risk prevention system and further deepened its transformation and innovation. In the new era, a new development pattern has emerged.

I.     Foundation of growth becoming firmer

Since the implementation of "One law and Two regulations" in 2007, the trust industry has maintained a 10-year growth. In recent years, despite the increasingly complex environment for the development of the industry, the trust industry maintained a steady and rapid growth. The internal structure of the assets under management continued to be optimized. The proprietary capital strength of the industry continued to increase, the share of risk assets steadily decreased, and the foundation for sustained growth of the trust industry was firmer.

A.    Size of trust assets under management continuing to grow

In 2017 Q3, the size of assets managed by the trust industry continued to grow steadily. At the end of Q3, the balance of trust assets was 24.41 trillion Yuan, an increase of 1.27 trillion Yuan from 23.14 trillion Yuan at the end of Q2. In Q3, the size of trust assets grew at a Y-o-Y growth rate of 34.33%, and increased by 5.47% from the previous quarter.

The sustainable and rapid growth of the scale of trust assets was inextricably linked with the macro economy. In particular, since the beginning of this year, the domestic economy registered a stable performance with momentum of growth. Further progress was made in the supply-side reform. People’s needs for a better life clearly drove up demand in consumption and investment. GDP growth picked up quickly, and the Y-o-Y growth of the first three quarters was 6.9%. Compared with the same period of last year, the quarterly growth rate of GDP maintained a high correlation with that of trust assets. Since 2013, the correlation coefficient between the two has reached as high as 0.865, demonstrating close relationship statistically between the growth rate of the trust industry and the macro economy. In the expectation of Chinese socialism’s entrance into a new era and stable economic growth with good momentum, it can be predicted that the macro foundation for maintaining the growth of the trust assets will be firmer.

B.    Structure of asset under management constantly improving

The management level is an important factor in supporting the growth of trust assets. According to the data of Q3, two structural indicators reflecting management and operation level were continuously optimized, playing a positive role in supporting sustainable growth of the trust assets.

First, in terms of the source of trust assets, the size and share of collective pecuniary trusts continued to increase. In Q3, the size of collective pecuniary trusts increased from 8.52 trillion Yuan in Q2 to 9.1 trillion Yuan, and the share rose from 36.82% to 37.29%. The size of single pecuniary trusts increased mildly, and the share dropped from 48% to 47.29%. The size and share of property trusts increased slightly. This change continued to reflect the trend started from 2013. Since the collective pecuniary trusts demanded higher level of management skill, the growth of size and share of collective pecuniary trusts reflected continued improvement of the management of entrusted assets.

Second, in terms of the use of funds, the size of financing trusts in Q3 fell to 4.46 trillion yuan from 4.49 trillion yuan in Q2, and the share of financing trusts dropped from 19.40% to 18.26%. Both of the size and share continued to decline. The size of investment trusts rose from 6.17 trillion yuan in Q2 to 6.36 trillion yuan, while the share of investment trusts dropped from 26.68% to 26.08%. The non-discretionary trusts increased from 12.48 trillion yuan in Q2 to 13.58 trillion yuan, and the share of non-discretionary trusts rose from 53.92% to 55.66%. Since 2013, the non-discretionary trusts grew significantly, accounting for more than 50% of total trust assets by 2017 Q3, and the size of investment trusts increased simultaneously.

C.    Capital strength of the industry continuing to increase

Capital strength is the safeguard for a strong and resilient trust industry in the new era. Historical statistics suggest that the size of the trust industry's  proprietary assets maintain a steady and upward trend. By 2017 Q3, the size of the industry's  proprietary assets reached 634.50 billion yuan, with an increase of 21.54 billion yuan compared with 2017 Q2. The average size of the 68 trust companies’  proprietary assets was 9.33 billion yuan. The growth rate of the industry's  proprietary assets maintained at a high level. The growth rate peaked at 36.07% in 2015 Q2. Although declined afterwards, the growth rate remained above 17% after 2015. Since 2017, the growth rate of the size of  proprietary assets was around 25% in the first three quarters, maintaining a steady and rapid growth.

The size of the owner's equity was 499.59 billion yuan in 2017 Q3, with an increase of 11.17 billion yuan from the previous quarter. Compared with the growth of  proprietary assets, the growth of owner's equity was relatively slow, accompanied by a mild increase of the asset-liability ratio of the trust industry. The asset-liability ratio of the industry in 2017 Q3 was 21.26%, which increased by 1 percentage point quarterly.

The continued growth of paid-in capital drives up the industry's capital strength. In 2017 Q3, the total paid-in capital of 68 trust companies was 223.41 billion yuan, with an increase of 1.60 billion yuan quarterly. The average capital growth for individual company was 3.29 billion yuan. The industry’s paid-in capital rose by 15.79% Y-o-Y in Q3, maintaining fast growth rate since 2013. The continued improvement of the capital strength of the trust companies enhanced their industry status and brand images, providing solid foundation for steady business growth and firm safeguard for industry development in the new era.

D.    Risk management and control becoming more effective

The rapid growth of trust assets demands higher standard of risk control. In recent years, the so-called "One Body Three Wings" regulatory framework of trust industry was well established and improved, and the risk control of the industry achieved remarkable progress. In 2017 Q3, the balance of risk assets was 139.24 billion yuan, and the risk assets ratio was 0.571%, dropped by 0.026 percentage point quarterly. This ratio showed a downward trend since 2016 Q2. In terms of the risk assets structure, the risk assets of collective fund trusts in Q3 accounted for 45.79% of total risk assets, and the share continued declining since 2015 Q1, reflecting continued optimization of the risk assets structure.

Improvements in risk control and decrease of risk assets contributed to steady growth and resilient development of the industry, laying solid foundation for long-term development in the new era.

II.   Industry benefit continuing to improve

With continued growth of trust asset and enhancement of capital strength, the industry benefit improved steadily. Operating income and total profit increased in the first three quarters. The contribution of trust business income and investment income to the total income continuously increased, and the benefits of investors created by trust industry remained at a high level.

A.   Revenue and profits keeping increasing

In 2017 Q3, operation income and profits of the industry increased. In terms of accumulated income in the year, the income in the first three quarters totaled 75.63 billion yuan, increased by 3.49% Y-o-Y from 73.08 billion yuan. Each trust company achieved total income of 1.11 billion yuan on average. In terms of quarterly income increase, the income of the whole industry increased by 25.85 billion yuan in Q3, up by 10.30% Y-o-Y, which recorded the fastest growth since 2015 Q4.

In terms of total profits, profits in the first three quarters of 2017 were 55.38 billion yuan, increased by 6.78% Y-o-Y from 51.86 billion yuan. On average, each trust company achieved total profits of 814 million yuan, maintaining steady growth. Profits realized in 2017 Q3 reached 18.89 billion yuan, increased by 5.34% Y-o-Y. Total profit growth slowed down after it reached the lowest point of -17.41% in 2016 Q1. The growth rate of profit in 2017 Q1 was 11.11%, and slowed down to 5% in Q2 and Q3.

The data analysis showed that operation income and total profits of the industry in Q3 increased moderately, but the growth of quarterly added value and cumulative added value were much slower than that of trust assets and inherent assets. It was highly relevant to the transformation and development of the industry. While the trust industry has entered new business areas and new business model, sustainable and large-scale income cannot be realized in short run. In the future, as the transformation of business matures and the policies of unified supervision of the asset management industry continue to be implemented, the quality and efficiency of assets managed by the trust industry will be further enhanced.

B.   Trust business making prominent contribution to the industry

The trust business is the core business of the trust company. The Income from the trust business, with steady growth, accounts for major part of that of the industry. In terms of the cumulative value, trust business income of the industry was 52.985 billion yuan in the first three quarters of 2017. On average, each trust company achieved income of 779 million yuan. Though the Y-o-Y growth rate of revenue fell slightly from 4.71% in Q2 to 3.01% in Q3, but the momentum of growth remained.

Quarterly Income of the trust Business accounted for large share of quarterly revenue of the trust industry. In 2017 Q3, quarterly income of the trust business accounted for more than two-third (67.68%) of quarterly income of the trust industry. Since 2015 Q2, the quarterly income of trust business accounted for more than 60% of the quarterly operation income. The average ratio of the first three quarters of 2017 was slightly higher, indicating that it contributed more to the income growth.

C.   Proprietary investment income resuming growth

In 2017 Q3, the investment income of the trust industry resumed its growth and became another important source of income. The proprietary investment income of Q3 was 64.80 billion yuan, rising 5.31% from 6.152 billion yuan in Q2; the cumulative investment income of the first three quarters reached 16.38 billion yuan, rising 6.39% Y-o-Y from 15.39 billion yuan. From 2016 Q4 to 2017 Q2, the Y-o-Y growth of investment income was on a downward trend. However, in 2017 Q3, the growth rate turned upward and reflected momentum of resumption.

As the investment income grew again, its share in proprietary business income kept rising. In 2017 Q3, the quarterly proprietary investment income accounted for 84.66% of the quarterly income, rising 5.44% from 79.22% in Q2 and 9.38% from 75.28% in Q1. Its contribution to investment income constantly increased.

The significant growth of proprietary investment income in the Q3 was mainly due to the following three factors. First, the trust companies’ capability of inherent investment was strengthened. Especially in 2017, the capital market showed an upward trend. Trust companies took advantage of market opportunities brought by the trend and achieved higher returns. Second, the rate of return of the proprietary investment projects improved. Trust companies usually allocated high share of their proprietary funds in trust products. As the rate of return of trust products continues to rise this year, it brought more investment income of proprietary funds. Third, the capital strength of trust companies was enhanced, thus increased proprietary funds for investment correspondingly. In recent years, with more capital injection, the capital strength of the trust company was magnificently enhanced. The proprietary funds for investment were also increased to a large scale. Some trust companies allocated high-quality assets in various ways like equity investment in financial institutions, PE investment, obtaining long-term and stable investment returns. Therefore, it can be expected that the investment return will keep rising in the future, with gradual growth of the capital market as well as steady improvement of professional skill, investment capacity and capital strength of trust companies.

D.   higher returns created for investors

Creating returns for investors and meeting the growing wealth needs of the people are major manifestations of the development of the trust industry. According to the data released by China Trustee Association, in September 2017, the industry created 67.28 billion yuan for investors through clearance of trust projects. While in Q3, the average monthly income obtained from the trust business by trust industry was 5.83 billion yuan, equivalent of 1/11 of investors’ income, which reflected trust industries adhered to the original position, "manage others’ money as entrusted ", and showed their advantages as professional financial institutions.

III.   Serving the real economy proactively

The report of the 19th CPC National Congress pointed out that in the new era, the focus of economic development must be placed on the real economy. The reforms in the financial sector will be advanced to strengthen its ability to serve the real economy and raise the share of direct financing. The trust industry always adheres to the principle of serving the real economy. The industry utilizes advantage of trust products, provides comprehensive solutions, directs social funds to direct financing, and meets investment and financing needs of the real economy.

A.   Supporting sustainable developments of industrial and commercial enterprises

According to the industry data, in 2017 Q3, the industrial and commercial enterprises were still the primary areas for trust funds investment. In Q3, the trust funds invested in industrial and commercial enterprises amounted to 5.56 trillion yuan, rising 8.01% from 5.15 trillion yuan in Q2，and its share in total assets further increased to 26.95%, rising 0.71 percentage point from 26.24% in Q2. In terms of new investment, the funds invested in industrial and commercial enterprises in 2017 Q3 amounted to 2.14 trillion yuan, accounting for 34.18% of the total. It remained to be the biggest investment sector.

Investment to industrial and commercial enterprises was continuously strengthened, which reflected the trust industry proactively met needs of real economy in recent years, and the development of real economy was highly relative to that of the trust industry. From the comparison between the Y-o-Y growth of trust fund investment and industrial added value, the Y-o-Y growth rate of industrial and commercial trusts went downward after going upward since 2013 Q1. In 2015 Q2, the growth rate reached the lowest point; the industrial added value also reached its lowest point in the same period. After that, with gradual deepening of supply-side reform, the industrial sector started to recover after adjustment, and the Y-o-Y growth of the balance of industrial and commercial trust started to rise as well. The correlation coefficient reached 0.741. The trust industry contributes to recovery of the real economy by supporting industrial and commercial enterprises. In turn, development of real economy creates a better macro-environment and business opportunities for trust industry. It can be foreseen that with continued deepening of supply-side reform and further growth of real economy, the demand of various industrial and commercial enterprises for trust funds will also increase. The trust industry will embrace more business opportunities.

B.   Supporting steady growth of real economy

In recent years, in order to further optimize the economic growth structure and control financial risks, the government has successively promulgated various policies to strengthen government debt management and the macro-regulation over the real estate industry. In particular, it has clarified that housing is for living in, not for speculation, pointing out the direction for the long-term development of basic industry and real estate industry. However, we must objectively see that the current economic growth is mainly driven by investment and the supply-side reform still needs to be strengthened, the impact of infrastructure construction investment and real estate investment on the economic growth is still magnificent, and both of the two areas have huge demand for capital. In accordance with policy guidance and regulatory requirements, the trust industry strictly controls risks and develops new business models including PPP, asset securitization, developer-held real estate investment and M&A. These models are used in basic industries and real estate, which not only contribute to transformation of basic industries and real estate but also contain economic and financial risks brought by rapid decline of the two industries, and play an active role in supporting structural adjustment and steady growth in real economy.

In 2017 Q3, the balance of trust funds invested in basic industries amounted to 3.21 trillion yuan, rising 0.11 trillion yuan from 3.10 trillion yuan in Q2. The balance invested in the real estate sector reached 2.07 trillion yuan, an increase of 0.3 trillion yuan compared to 1.77 trillion yuan in Q2. In terms of share, infrastructure construction decreased steadily from 15.81% in Q2 to 15.55% in Q3 and remained basically stable. However, trust funds in real estate increased slightly from 9.02% in Q2 to 10.01% in Q3. The share also remained basically stable in recent years. It can be seen that trust industry stably supported basic industries and real estate, making a positive contribution to steady economic growth.

C.    Supporting the new needs of real economy

China’s economy has been transitioning from a phase of rapid growth to a stage of high-quality development. The development of the real economy has brought new opportunities and needs. In recent years, especially since the beginning of this year, the trust industry has been keenly capturing new opportunities in the transformation of China's economic growth drivers in the new era, which effectively supported new demands for the development of the real economy.

First, the trust industry implemented the supply-side structural reform policies to support enterprises in cutting overcapacity, reducing excess inventory, and deleveraging to help industrial transformation and upgrading. In recent years, especially since the beginning of this year, some trust companies actively established debt-to-equity swaps funds to support market-based debt-to-equity swaps of large natural resources and energy companies, providing financial support for enterprises in cutting excess capacity, and containing dramatic negative impacts on the markets and society by overcapacity cutting. Some trust companies set up industrial development funds and played an active role in technology innovation of traditional industries, structural adjustment of production, integration of upstream and downstream industries, and capital management of traditional industries.

Second, the trust industry vigorously carried out investment in emerging industries, helping the real economy to enhance growth efficiency. Since the beginning of this year, a number of trust companies issued trust products and actively supported new economic growth engines such as advanced manufacturing, energy conservation and environmental protection, information industry, cultural industry, medical industry, sharing economy and modern supply chains. They also innovated models and provided financial products and services to meet new needs of market, effectively building a bridge between capital market and frontiers of the real economy and strongly supporting the development of strategic emerging industries and enterprises.

Third, the trust industry expanded into new areas such as small and micro finance, actively supporting growth of SMEs and upgrading consumption. Some trust companies expanded their business in the field of small and micro finance this year. These companies, subject to laws, regulations and risk control requirements, reached out to meet financial needs of SMEs through various means such as fund-based investment and trust loans. Some trust companies with industry background took advantage of shareholders' industrial resources to focus on financial services of supply chain, meeting needs of SMEs in the upstream and downstream industries as well as easing financial difficulties of SMEs. A number of trust companies actively cooperated with financial institutions such as consumer finance companies and auto finance companies to carry out financial trust services in the consumption field, meeting the financial needs in the process of upgrading consumption.

IV.     Improvement of transformation and innovation capacity

In 2017 Q3, the industry data fully reflected the transformation and development of trust industry under the guidance of the regulatory authorities in recent years. In particular, the innovation in assets management, wealth management and entrusted services was further deepened, and the professional competence was continuously enhanced, acting as safeguards for development of trust industry in new era.

A.     Asset management capacity increasing significantly

Asset management capacity is the basis for trust companies to achieve professional development and differentiated competition in the future. In recent years, trust companies continuously improved their asset management capabilities. In terms of asset allocation, the share of investment businesses such as equity investment and securities investment was increasing. The investment management skill was effectively improved. In terms of new products, trust companies continued to improve proactive management capabilities and launched various active management trust products. In terms of investment areas, trust companies took advantage of the trusteeship and focused on specialized areas to constantly improve the specialization of asset management.

Trust companies speeded up transformation of equity investment. More investment went to new areas including real estate and emerging industries. Some leading trust companies attached high importance to enhancement of professional capacity in equity investment. First, they focused on specific industries and establish long-term investment support line. Second, they establish specialized risk-control and  decision-making lines, using external expertise to improve decision-making. Third, they continuously upgraded and improved post-investment management processes, systems and operational procedures, ensuring risk management covers the essential steps of investment. Fourth, they improved service to target companies, enhancing market competitiveness of invested enterprises and providing safeguard for future investment exit. With improvement of professional capability of equity investment, trust companies achieved remarkable results in equity investment, and actively guided funds to support structural adjustment and development of new industries.

Trust companies continued to improve securities investment skill, closely followed stock market fluctuation, and improved scale and capability of asset management. As of 2017 Q3, investment in securities in funds trust was 2.96 trillion yuan, up 4.23% Y-o-Y. Investment in stock market in Q3 was 885.8 billion yuan, up 85.63% Y-o-Y. It showed that trust companies seized market opportunities in the A-share market and optimized asset allocation in Q3. Some trust companies set up portfolio investment team building on continued improvements of securities investment capabilities. They actively developed products such as FOF and MOM, and significantly improved the level of active management. Some trust companies with leading positions in the securities business also released securities service systems with independent intellectual property rights, significantly improving their entrusted services.

B.     Wealth management capabilities becoming matured

In the first three quarters of 2017, the wealth management business of trust companies developed rapidly and the wealth management capabilities were improved. In terms of products, a number of trust companies developed products with fixed and variable returns, products of short-term and long-term, products of investment to industrial sectors and capital market. The institutional clients and individual customers had more investment choices. In particular, some leading trust companies applied their professional investment management capabilities to develop net-worth trust products. The product manager charged management fees only. The investors were capable of benefiting from the full return of the investment, without any limit set through expected yields.

In terms of brand building, trust companies upgraded their product category towards the direction of serialization, brand-building and funding-characteristic. According to the information of collective trust products published by Wind, in the first three quarters, a number of companies launched serialized brands according to types of products and enhanced recognition of wealth management brands in the highly competitive product market. Many trust companies also used Internet technology to develop one-stop wealth management platform focusing on account management which combines functions of product trading, asset allocation, portfolio inquiry, derivative services. This platform significantly enhanced customer stickiness and brand recognition.

In terms of family trust service, a number of trust companies launched various types of family trust products in the first three quarters to meet the needs of ultra-high net worth clients in family wealth management. According to practice of a number of companies, family trust products are more diversified this year, ranging from traditional tailored and package products to joint family offices and other models. Capability of family trust management was building. Some trust companies jointly worked with private bank system. They developed on-line exclusive family trust information service system to meet actual demands and improve service standard.

C.   Entrusted service capability increasing significantly

Entrusted services are the origin of trusteeship and the core areas of trust industry’s transformation and development in the future. Asset securitization is one of the most important entrusted services. In the first three quarters of 2017, trust companies advanced securitization of credit assets, participated in securitization of corporate assets and explored the trust-based asset-backed notes (ABN) market. According to Wind statistics, as of 2017 Q3, 13 trust companies issued asset-backed notes of 47.5 billion yuan as issuer’s manager. The underlying assets were more diversified, including consumer finance, commercial property mortgage loans, PPP projects etc. With rapid business development, trust companies continuously strengthened capabilities of asset securitization, conducted PRE-ABS business. They also arranged and created assets suitable for securitization. In terms of funding sources, they built institutional customer channels, improving professionalism in asset origin, undertaking and issuance. They provided full service around the business chain of asset securitization, including creation, operation and management of assets.

Charitable trust is a brand new area for application of trusteeship. It is an important direction for trust industry to show its management capability and return to its origin in the future. According to charity information on the national public platform of the Ministry of Civil Affairs, as of 2017 Q3, 45 charitable trusts were registered and 44 of them entrusted trust companies as trustees or joint trustees. Trust companies can integrate financial and charitable resources when conducting charitable trust business. They can also help charities to improve efficiency of charity funds and provide diversified entrusted management services for high-net-worth clients. With more practice in charitable trust business, trust companies are able to clearly define entrusted management responsibilities in the business process, improving management in various aspects such as registration, operation, termination and liquidation. In addition, trust companies are exploring a sound charitable trust management mechanism to safeguard long-term sustainable development of charitable trust business.

V.     Grasping new opportunities in the new era

Looking into the future, a series of important positive changes will take place in macroeconomic, financial markets and regulatory framework，while continued advances are made in socialism with Chinese characteristics in new era. The trust industry should seize opportunities and meet challenges, addressing problems of imbalance and inadequacy and achieving further development in the new era.

A.     Serving the real economy and improving quality of development

In the future, serving the real economy is still on the top of priorities of the trust companies. Trust companies should take full advantage of trust instruments to meet investment and financing needs of real economy. First, trust companies should promote investment and financing in emerging industries. In the future, trust companies need to grasp investment and financing opportunities in emerging areas of "improving the quality of the supply system" proposed in the 19th CPC National Congress report, fostering new growth areas and drivers in medium-high end consumption, innovation-driven development, the green and low-carbon economy, the sharing economy and modern supply chains. Second, trust companies should carry forward investment and financing in infrastructure construction, transform traditional financing model of government financing platform, and advance businesses including PPP, infrastructure investment trust and infrastructure asset securitization. Third, trust companies should support the rental market and gradually shift from traditional investment and financing model of property development to inventory property business including REITs and leasing asset securitization.

The trust industry can optimize size and structure of assets and enhance proactive management by serving the real economy. The rapid growth of trust assets will be expected to bring more income and profits to the industry, enhancing development quality of the industry.

B.     Enhancing wealth management to meet the needs of people's better life

In the future, trust companies should focus on the transformation of major social contradictions in the new era, further strengthen financial service innovation and improve wealth management expertise. First, trust companies should improve customer service, centering around customers and meeting needs of clients with different property size and risk preferences. Second, trust companies should develop asset management business, expanding areas of asset allocation. They should also diversify product lines to meet diversified, specialized and personal needs of customers. Third, trust companies should start with capital end and consumer end, innovating models to set up more channels. On the basis of wealth management, trust companies should also promote development of specialized businesses, forming a benign interaction between wealth management and other businesses.

Through continued improvement of wealth management, the trust industry will continue to guide clients’ funds into the real economy, and improve financial efficiency by converting savings to investment. On the other hand, the trust industry will continue to generate higher returns for clients’ and raise people’s incomes, meeting people's needs for a better life.

C.     Adhering to principle of returning to the origin, focusing on development of people's wellbeing and social services

In the future, the trust industry’s returning to its origin will be effectively promoted by improving people’s wellbeing and supporting the development of social services. First, the trust industry should focus on development of social services such as education, science and technology, culture, and healthcare. The trust industry should develop cultural industry trusts, education trusts, retirement trusts and other unique trust products. Second, the trust industry should promote development of charitable trusts, utilize advantages of the trusteeship, and make new progress in social philanthropy. Third, the trust industry should develop green trust through innovation, and use multiple means to support green industries such as energy conservation and environmental protection.

By supporting development of people's wellbeing and social services, the trust industry can return to its origin and promote its own transformation. It will contribute to the social development in a more comprehensive and pragmatic way in terms of the legal system, industrial development and business practices.

D.     Enhancing professional ability, taking initiative to adapt to the future regulatory framework

Recently, the People's Bank of China, together with China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission, drafted the Guiding Opinions on Regulating the Asset Management Business of Financial Institutions (Consultation Paper) (Guiding Opinion). These Guiding Opinions put forward unified and clear regulatory requirements in response to problems caused by rapid growth of asset management of financial institutions, including defect business, regulatory arbitrage, multi-layer nested product, rigid repayment, evading regulation rules and macro-control policies.

In general, the regulatory theme reflected in the Guiding Opinions is in line with the trend of development and evolution of the trust industry in the future. First, it is in line with professional competence requirements. The Guiding Opinions intend to solve problems of regulatory arbitrage. They demand financial institutions to go straight to underlying assets in business operation. They also require financial institutions to enhance professional investment capacity of basic assets. The long-term sustainable development of trust companies in the future can never rely on supervisory arbitrage and so called “channel business”. Trust companies are expected to improve professional investment and management capabilities in basic assets. Second, they are in line with understanding of risks. The Guiding Opinions aim to break rigid repayment, since they cannot address substantive risks. In recent years, the trust industry has made good progress in risk management, but it is confronted with challenges of breaking rigid repayment. Net-worth asset management products can help to solve this problem. Third, they are in line with understanding of the future development of asset management. In terms of asset allocation, the Opinions demand the trust industry to meet needs of the real economy. In terms of funding sources, the Opinions demand the trust industry to serve qualified individual investors and institutional investors with reasonable risk tolerance. Consequently, the trust industry should prepare itself in advance, taking steps to meet requirements set by new regulatory rules and framework. The trust industry should improve management of entrusted assets with aims to serve the real economy and contain financial risks.