Beijing to revive troubled trust sector as govt-run cos run into difficulties

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BEIJING, June 26 (AFP): China is to revive several trust and investment corporations after hundreds of the government-run companies ran into difficulties during the 1990s Asian financial crisis, state press said today.
The China Banking Regulatory Commission will issue licences to five surviving companies that have largely been unable to operate since the crisis a decade ago, the China Daily said.
Hundreds of "international trust and investment corporations" or "ITICs" existed in China prior to the crisis but currently only 55 survive, with most prevented from doing business due to regulations implemented following 1998, the newspaper said.
The new licences aim to reform the companies into providing "proper trust services offering more diverse financial instruments for corporate and individual clients," it said.
As of September 2006, China's trust firms managed combined assets of 317.8 billion yuan (41 billion dollars), the newspaper reported earlier.
Traditionally the trust firms have served as investment arms of local governments but the sector took a huge blow with the 1999 bankruptcy of Guangdong International Trust and Investment Corp. (GITIC), a reportedly three billion dollar crash that was at the time China's largest-ever bankruptcy.
After the crash of the Guangdong firm, the government realised that such companies were wracked with credit crises stemming from illegal trading and a lack of risk management, the China Daily said in an earlier report.