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(Hosting-NewsWire.com, July 25, 2012 ) San Francisco, CA - China Credit Trust Co., of China’s largest trust company admits being at risk with a loan from one of its large feeder fund, setting in motion a test case for a deeply exposed harassed property developers.
The company under management in 2010, ranking third in assets, stated that it was taking action in tracking down money loaned to Zhenfu Energy via the Jinkai #1 fund. Reports said that the boss has been arrested amidst news that the total amount he owes is 500 million yuan.
China Credit Trust said, “Zhenfu Group and its related companies have already been sued three times in the last two quarters, all because of off-the-balance-sheet underground channels fundraisings”. What the government is trying to find out is who and how much is owed.
This might be the first failure of China’s fast-growing trust industry, having managed more than 5 trillion yuan of assets at the end of the previous year, roughly equaling to one-tenth of all outstanding loans in China, as told by China Trust Association.
Zhenfu Energy is a joint venture by three mining and coking coal companies in Shanxi’s rich coal province. While the loan to this company is presently at risk, the deeper risk comes from property markets, where there is a struggle with high interest payments and sales slowdown.
Just last month, a respected magazine reported that troubled property assets were bought by government-backed asset using management funds to avoid imminent default.
For the past three years, Chinese trust companies have flourished, despite banks lending controls choking off property developers to raise funds through trusts, aggregating money from wealthy individuals and institutional investors.
To limit exposure to wealthy individuals, Beijing is required a minimum upfront investment of 1 million yuan for investors instead of retail customers who doesn’t have the grasp of the risks involved.
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Jack Strausse
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Source: EmailWire.Com
Source: EmailWire.com
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