Laws on way for trust industry

PUBLISHED : Thursday, 20 March, 1997, 12:00am
UPDATED : Thursday, 20 March, 1997, 12:00am

China is expected to pass laws to regulate the country's booming trust companies.

A source said a draft of the proposed law was ready and would be tabled in the National People's Congress this year.

If passed, trust companies would be allowed to only conduct transactions on behalf of trustees.

Trust companies in China are different from those in developed economies. Most are actually mini-banks, which receive deposits and extend loans.

'Many trust companies are more like financial institutions,' a state official said.

'The proposed law is to restore their original functions and roles under Western concepts.' The proposed law is the first legislative attempt to tackle the tricky problem of regulating the thriving non-banking financial institutions.

It outlines the relationship between a trustee and a beneficiary and the operational details of a trust company.

The legislation was originally scheduled for submission to the congress by the end of last year.

It was postponed to this year.

Practitioners suspect the delay may be related to the concerns of officials who have vested interests in trust companies.

Many trust companies are backed by government departments.

'It is surprising that the law has been delayed because it contains mainly technical details with no controversial areas,' a source said.

'But the chance of getting it passed this year is quite high.'