JP Morgan and Fidelity to apply for a trust licence in China

In the morning of February 23, foreign investment banks and asset managers are preparing to apply for a trust licence in China as the trust industry has attracted another wave of interest from foreign investors, the report said in the A.M. news agency.　　JPMorgan and Fidelity are among them, according to people familiar with the matter. The Financial Times wrote that the central bank was pressuring Chinese commercial banks to curb credit growth in an initiative to rein in inflation.　　However, trust companies that do not take deposits from depositors are much less regulated than the more tightly regulated commercial banks.　　Many potential foreign investors believe that trust companies can become more profitable investment vehicles because their areas of business are more ambiguous – at the intersection of the formal banking system and the shadow banking system, while providing a broad range of financial services. China currently has 55 trust companies that can raise money for clients, create investment products without a return cap, and engage in proprietary trading. Most trust companies are owned by local governments or state enterprises. Foreign banks, such as JPMorgan Chase, eager to open up their wealth management business in China, find this model particularly tempting.　　Over the past few years, some foreign financial institutions have invested in Chinese trust companies. But foreign investors are not allowed to hold more than 20% per cent of their holdings in trust companies, leaving them with little control over their operations.　　According to people familiar with HSBC's investment strategy in China, HSBC has studied the concept of trust banking, but has not yet found a desirable partner. The clients of China's trust companies are broadly divided into two categories: private enterprises that are struggling to obtain capital from the traditional banking system, and wealthy families seeking higher returns.