A rare public default at China’s Anxin Trust is drawing attention to cracks in the RMB 7.9 trillion ($1.13 trillion) market for investment products in the country, where similar failures have been dealt with behind the scenes in the past, said the Financial Times.
Anxin, which missed payments on RMB 11.8 billion for 25 trust products earlier this year, has been forced to publicly document its default because it is listed on the Shanghai stock exchange.
The situation has offered a rare glimpse into the factors leading up to failed trust products, which for Anxin include giving loans to an acquisitive property group that has since been delisted from a Chinese bourse. The trust company’s shares tumbled more than 9% on Tuesday after it said that its parent company’s shares had been frozen by a court in Shanghai.
In the past the Chinese government has instructed state banks to help struggling trust investors. But regulators are now expected to allow more companies to default on bank loans, bonds and credit from the country’s RMB 61.3 trillion shadow lending business, which includes trusts and wealth management products, as the economy slows.