CHINA Law and Practice Contributed by: Chengchen Gan (Mark), Commerce & Finance Law Offices
in China, trustees are expected to maintain a level of care in line with industry standards throughout the entire process of asset investment and management. This includes ensuring the ability to identify risks and manage them appropriately. 6. Roles and Responsibilities of Fiduciaries 6.1 Prevalence of Corporate Fiduciaries According to China’s Trust Law, individuals, enterpris - es, and organisations can all serve as trustees. How - ever, under the “Administrative Measures for Trust Companies”, establishing a trust company requires approval from the China Banking and Insurance Regu - latory Commission (CBIRC) and obtaining a financial licence, leading to a prevalence of corporate trustees holding trust operation licences in the practice of trust cases in China. Due to regulatory measures imposed on financial institutions, corporate trustees with these licences are held to higher standards of conduct. 6.2 Fiduciary Liabilities Article 22 of the Trust Law explicitly states that, “[w] here trustees violate the intent of the trust when car - rying out the disposition of the trust property or cause losses to the trust property because of breaching their administrative duties or handling trust affairs in an inappropriate manner, the beneficiary has the right to apply to a people’s court to revoke the act of disposi - tion as well as having the right to require the trustees to restore the trust property to its original state or pay compensation”. Trustees may include provisions in the trust deed, including exemptions from trust responsibilities. How - ever, it is crucial to note that such clauses must not contradict relevant provisions of laws and regulations. 6.3 Fiduciary Regulation The “Notice on Standardizing the Classification of Trust Business of Trust Companies” (YinBaoJianGui [2023] No 1), issued by the China Banking and Insur - ance Regulatory Commission, contains regulations
concerning a fiduciary’s investment of assets. The key provisions include: • trustees, when engaging in asset investment, asset management, public welfare, and other trust busi - ness functions, must adhere to standards consist - ent with the “Guiding Opinions on Regulating the Asset Management Business of Financial Institu - tions”; • trustees must manage trust affairs in the best interests of beneficiaries, fulfilling their entrust - ed responsibilities with honesty, diligence and accountability; • the definition of classification criteria; and • the stipulation of classification standards and operational requirements for the trust industry. Although this document lacks legal enforceability, it serves as policy guidance for the industry. It directs the development of the trust system in China, provid - ing a broad direction for industry practices. 6.4 Fiduciary Investment The China Banking and Insurance Regulatory Com - mission categorises commercial trust products into three types: asset management trusts, asset service trusts, and public welfare trusts. • In China’s trust industry, asset management trusts are akin to private equity funds, where trustees diversify risks through various investment combina - tions. Currently, industry regulations do not specify proportions, types, or quantities, therefore typically relying on trustees’ market judgments. • Asset service trusts are highly customised, with trustees tailoring financial trust products according to the beneficiary’s instructions, implementing each step as per the trust deed or other written agree - ments. Under these two distinct models, trustees may man - age investments based on their own proactive deci - sions or according to the beneficiary’s wishes, which may also include operational management of entities. Currently, there are no specific rules or restrictions governing such activities.
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