The Shanghai city government has set up a new umbrella company to hold its numerous investments and avoid having to spin off the highly profitable securities arm of its main trust company. The move came as Beijing turned up the heat on domestic trust companies to sell off their securities arms as part of a clean-up for the mainland's troubled trust sector. The new holding company, called Shanghai International Group Corp, has registered capital of five billion yuan (about HK$4.67 billion), and its creation will put the city's business operations at arm's length from government. Under the newly formed firm is the Shanghai International Trust and Investment Corp, which has securities operations but must give them up to comply with the Securities Law, implemented last year. The trust company's securities operations will be combined with those of Shanghai Finance Securities, a brokerage house that is also owned by the city government, a government official said. The newly combined securities firm will be known as Shanghai Securities and will remain under the government shareholding firm, though it will technically be separate from the trust operations. The new setup has come a month after a similar holding company was formed in Beijing. Beijing International Trust and Investment Corp is the city's first such firm to be formed since a nationwide restructuring of the trust industry took hold two years ago. The mainland's financial regulators have been concerned that trust companies, many of them with severe bad-debt problems, should be cordoned off from the nation's stock markets. At the same time, the move eases Shanghai fears that it could lose control of another big securities company. Big broker Shenyin Wanguo has already come under the protective arm of the Beijing-based Everbright Group. Shanghai International Group will also have industry, trade, finance and overseas investments injected into it, official newspapers said. Zhou Youdao, head of Shanghai International Trust, will become chairman of the new company. Tan Yi, deputy president of the city government's Pudong Development Bank, will be president. 'The city government wants to create a huge state asset management company that controls securities, banks and industrial companies,' said a stock market analyst. 'This will facilitate financial and industrial co-operation.' An executive at the Shanghai International Trust said the move to set up the new vehicle would keep the government from directly interfering in the operations of the companies it controls. 'This is a strategic reorganisation,' he said.