Trust is a special property management system and legal act, and it is also a financial system. Trust, together with banks, insurance, and securities, constitutes the modern financial system.

The trust business is extremely resilient and versatile because of its flexibility.

Trust companies are the only institutions that can comprehensively utilize financial markets and connect industries and financial markets. They can provide a full range of financial services from investment and financing in infrastructure and large-scale project construction to corporate mergers and reorganizations and restructuring consulting, to leasing and guarantees.

Serve.

The financier raises funds from investors through a trust company, and guarantees the return of principal and income when due by mortgaging (pledge) assets (equities) to the trust company and providing third-party guarantees.

Guarantee in the traditional sense means that when an individual or enterprise borrows money from a bank, in order to reduce risks, the bank does not lend directly to the individual, but requires the borrower to find a third party (a guarantee company or a qualified individual) to provide a credit guarantee for it.

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The guarantee company will ask the borrower to issue relevant qualification certificates for review according to the bank's requirements, and then submit the reviewed materials to the bank. The bank will release the loan after review, and the guarantee company will charge corresponding service fees.

This is the traditional bancassurance business.

Trusts are similar to guarantees to a certain extent. They both raise funds to invest in certain underlying projects, and then obtain returns and return them to investors.

But there are still many differences between the two.

First of all, in terms of scale, there are currently 62 trust companies in the country, most of which are financial institutions established under the leadership of the provincial government, such as Zhongyuan Trust in Henan. The controlling shareholder is Henan Investment Group Co., Ltd., which is wholly owned by the Henan Provincial People's Government.

Similar trust companies include Shanghai Trust, Jilin Trust, Shandong Trust, Suzhou Trust, etc.

Others are directly established by large state-owned enterprises, such as Kunlun Trust, a subsidiary of PetroChina, AVIC Trust, a subsidiary of China Aerospace Group, and Ping An Trust, a subsidiary of Ping An Group.

China Railway Trust, a subsidiary of China Railway Group Corporation.

The registered capital is generally around 1.2 billion.

Compared with the same period last year, there were 1,640 guarantee companies registered in Henan Province alone, with registered capitals mostly ranging from 5 million to 100 million.

Secondly, judging from the flow of raised funds, trusts mainly include real estate trusts, listed company equity pledge financing trusts, and securities investment trusts.

(The equity pledge financing trust of listed companies is equivalent to what we usually call private equity funds, while the securities investment trust is equivalent to sunshine private equity funds).

Fixed-income products are generally invested in industries (real estate, government projects, listed company projects), and the rate of return belongs to the fixed-income category, with the rate of return generally ranging from 9% to 12%.

For trust products issued by trust companies, in order to avoid risks to the greatest extent, starting from the selection of projects, trust companies generally control risks from two aspects: counterparties and mortgages and pledges, and give priority to those companies with stable operations, strong solvency, and first-class trust products.

Projects with sufficient sources of repayment, easy realization of collateral (pledge) and high realization value.

After the trust project is established, the trust company will regularly and irregularly conduct risk inspections on the project, including the financier's operating conditions, financial status, mortgage (pledge) status, etc.

The review process is very strict. At the same time, after the trust company's project procedures are determined, it must be reported to the Banking Regulatory Bureau. If the regulatory authorities believe that the project has risks, it will be stopped in time.

The projects invested by guarantee companies are only subject to the review of the company's own internal risk control system, which involves greater risks.

To sum up, trust products are much safer than financial products of guarantee companies.

Thirdly, from a legal perspective, trust companies are established in accordance with the "Trust Law of the People's Republic of China" and the "Trust Company Management Measures", and the financial products launched comply with the "Trust Company Pooled Funds" promulgated by the China Banking Regulatory Commission.

The establishment and issuance of "Trust Plan Management Measures" has a clear legal basis and strict review and filing procedures; and the establishment of investment guarantee companies is based on the "Interim Measures for the Management of Financing Guarantee Companies". According to Article 21 of the Measures, financing guarantee companies

They are not allowed to engage in activities such as taking deposits, granting loans, entrusted investments, etc. Anyone suspected of illegal fund-raising activities will be investigated and punished in accordance with the law.

Judging from the legal nature, the entrusted investment behavior of the investment guarantee company has certain legal flaws.

Fourth, from the perspective of return rate, the monthly return rate that guarantee companies can currently provide is generally 1.5%-2%, while the monthly return rate of small trusts is 0.75%, while the annualized return rate of banks during the same period is 2.5%, and the monthly return rate is 2.5%.

The yield is 0.21%. If we look at the yield alone, there is indeed a gap between trust companies.

Such a high rate of return must necessarily require the guarantee company's investment target to have very strong profitability, and relying on the current capital and talent reserves of the guarantee company, it is very difficult to choose a project with such high profitability.

According to Zhao Jinjing, secretary-general of the Henan Real Estate Chamber of Commerce, truly mature real estate companies usually do not use the money from guarantee companies, and most of the money from guarantee companies flows to some small and medium-sized companies that are new to the real estate industry.

These small real estate developers use the guarantee company's money with a speculative mentality, but the high interest rates make it full of risks for real estate companies to use this financing method.