Know your bank-trust products before investment

Investors in bank-trust products need to be alert to any risks involved and aware of all information disclosures related to the products, say counsel.

As trusts are instruments intended to evade supervision, Shanghai-based partner Charles Qin of Llinks Law Offices advised that “investors need to consider seriously the product's risk degree and the party responsible for assuming risks, especially for products with high income”.

In an effort to curb dubious lending practices, the China Banking Regulatory Commission (CBRC) recently halted the launch of bank-trust wealth management products. Banks were using these products to give out loans to local governments via shady procedures that kept the transactions off record. The banks were able to skirt the government's credit quota controls and shift the entire risk of the bank-trust product default onto the investors.