What’s new: New China Trust Co. Ltd., formerly controlled by embattled conglomerate Tomorrow Holding Co. Ltd., was declared bankrupt Friday, one year after entering insolvency proceedings.
A court in Southwest China’s Chongqing municipality ruled that the trust firm was unable to pay off due debt and its assets weren’t able to cover all of its liabilities.
New China Trust, which provided trust-related financial services, was one of nine companies taken over in July 2020 by financial regulators trying to dismantle Tomorrow Holding, a sprawling business empire led by fallen tycoon Xiao Jianhua. The group was one of the highest-profile targets swept up in China’s crackdown on financial risks.
In August 2021, the trust company sought deep-pocketed investors to restructure itself, but no deal was eventually reached due to a variety of reasons although many buyers showed interest, a source close to the firm told Caixin.
As the self-rescue failed, New China Trust applied for bankruptcy and liquidation, which was greenlighted by the now-defunct China Banking and Insurance Regulatory Commission last year.
The background: Players in China’s 22 trillion yuan trust industry, once a popular funding source for Chinese real estate developers, have been scrambling to offload risky assets in recent years amid tightened regulatory oversight and a prolonged property crisis.
While some trust firms are selling their nonperforming assets to bad-asset managers, several troubled companies have few choices other than to attract strategic investors, push for restructuring, or go into bankruptcy proceedings.
Related: Five Things to Know About Chinese Trust Firms’ Scramble to Offload Risky Assets
Contact reporter Zhang Ziyu (ziyuzhang@caixin.com) and editor Bertrand Teo (bertrandteo@caixin.com)
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