CHINA’S trust sector posted a further slowdown in quarterly growth in assets in the three months from July to September, signaling that banks may be scaling back their use of trusts to make off-balance-sheet loans.

    The total assets managed by trust companies reached 12.95 trillion yuan (US$2.1 trillion) at the end of September, up 3.77 percent from the second quarter, the slowest pace of growth since the fourth quarter of 2010, according to data from the China Trustee Association, a government-backed industry group.

    The quarterly growth rate was significantly lower compared with the 6.4 percent growth registered in the second quarter and 7.52 percent in the first, according to data from the China Trustee Association.

    There are no real surprises in where the trusts are allocating their funds. With the economy slowing and debt levels across the economy already at high levels, the trusts have grown increasingly wary of extending yet more credit to those sectors that have long been the main recipients of their funds. Total outstanding trust financing of infrastructure projects and to industrial and commercial companies fell in the third quarter, while funding of property developers was flat.

    Instead, more trust assets were allocated into equities — likely in response to rising stock prices — as well as bonds and the interbank market, where banks are happy to borrow to order to maintain adequate liquidity.

    (SD-Agencies)