Following multiple Chinese trust companies being entrusted due to payment crises, Zhonghang Trust, a subsidiary of Aviation Industry Corporation of China (AVIC), has become the first large state-owned enterprise trust company to be entrusted since the promulgation of the Trust Law.
On the evening of April 18, Zhonghang Trust Corporation Limited (“Zhonghang Trust”) announced on its official website that, after resolutions by the shareholders’ meeting and the board of directors, the company has signed a “Trust Service Agreement” with Industrial and Commercial Bank of China Trust Co., Ltd. and Guotai Taikang Trust Co., Ltd., appointing the two companies to provide management services for its daily operations.
Zhonghang Trust stated, “The company’s related debt relationships and trust legal relationships remain unchanged. The entrusted services began on April 18, 2025, with the end date to be negotiated by both parties.”
Public information shows that Zhonghang Trust was jointly established by Aviation Industry Corporation of China Limited (referred to as AVIC) and Huaxia Bank, managing assets exceeding hundreds of billions of yuan.
Among them, AVIC Investment Holding Co., Ltd. (“AVIC Investment”) holds 84.42% of Zhonghang Trust’s shares, while Huaxia Bank holds 15.58%. AVIC Investment is a subsidiary of AVIC Industrial Investment Holding Company, which is a state-owned mega military industry enterprise under the central government.
Thus, Zhonghang Trust is not only a third-tier subsidiary of a state-owned enterprise but also a trust company with a listing background, Sino-foreign joint venture characteristics, and military industry concepts.
According to the performance report disclosed in January of this year, AVIC Industrial Investment projects a net loss of 48 million yuan for the full year of 2024, with a non-recurring net loss of 189 million yuan, marking the first loss since its listing. From 2021 to 2023, AVIC Industrial Investment’s net profits were 4.471 billion yuan, 1.682 billion yuan, and 290 million yuan, showing a downward trend year by year.
Looking at Zhonghang Trust’s financial information as of the end of June 2024, the company achieved total operating revenue of 594 million yuan and a net profit of 91.7635 million yuan, decreasing by approximately 40% and 80% year-on-year, respectively. Among the existing 67 trust companies, Zhonghang Trust ranks around the 20th in terms of asset size, managing assets exceeding 600 billion yuan.
The downturn in the Chinese real estate industry in recent years has caused frequent defaults in real estate trust products in which Zhonghang Trust has a heavy stake. Insiders revealed that Zhonghang Trust was deeply involved in financing projects of real estate companies like Evergrande, Sunac, and Red Star Macalline, and the liquidity crisis in these projects directly led to some trust products being unable to pay on time.
In February of this year, AVIC’s former Party Secretary and Chairman Tan Ruisong was reported for investigation by the authorities for “serious violations of laws and discipline.” The report mentioned that Tan was involved in “trading power for personal gain,” “moral corruption,” and “relying on military industry for personal benefits, embezzling significant public assets,” among other accusations.
On April 14, AVIC Industrial Investment released an announcement stating that the company’s voluntary delisting proposal was approved at the shareholders’ meeting. As for the reason for the voluntary delisting, AVIC Industrial Investment mentioned that it mainly faced significant operational uncertainties, which could have a major impact on the company.
On April 16, dozens of investors gathered at Zhonghang Trust’s Shanghai headquarters, displaying banners and chanting slogans, demanding the repayment of principal and transparency in fund usage. Although Zhonghang Trust has not officially announced a “default,” the suspension of payments for some trust products to social investors is an undeniable fact.
In reality, Zhonghang Trust is not the first trust company to be entrusted. Public information shows that previously in September 2023 and April 2024, CMB Trust and Minsheng Trust were entrusted after experiencing “defaults.”
In 2020, six financial institutions under the Tomorrow Group, including New Era Trust and Hua Xia Trust, were taken over by the former China Banking and Insurance Regulatory Commission due to illegal business operations and violations of laws and regulations.
Regarding the entrustment of Zhonghang Trust, financial industry insiders commented that Zhonghang Trust is a genuinely large state-owned enterprise, and its trust affects the entire industry significantly. Some industry insiders believe that Zhonghang Trust’s entrustment is a landmark event as the first “truly state-owned enterprise trust company” to be entrusted since the promulgation of the Trust Law in 2022.