Jan. 17 (Bloomberg) -- Citic Trust Co., a unit of China’s biggest state-owned investment company, said a steel company didn’t make loan payments that would have been used to pay investors in a trust product.
Yichang Three Gorges Quantong Coated and Galvanized Plate Co. failed to pay 119 million yuan ($19 million) in principle and interest payments due Jan. 14 to a trust-product account, Citic Trust said in a statement posted to its website Jan. 15. The steel company last month made a 74.6 million yuan payment a day after the Dec. 20 deadline.
Yichang, which has suffered from declining steel prices, raised 1.33 billion yuan in January 2012 through a trust product sold by Citic Trust and used the money to buy raw materials. A local-government company in the city of Yichang in the central province of Hubei is considering buying equity in the company, the Economic Observer reported Jan. 14.
Trusts, which target people with at least 1 million yuan to invest, have grown to account for more than a quarter of China’s estimated $3.35 trillion in lending outside the banking system, according to an Oct. 16 UBS AG report. More loosely regulated than banks because they don’t hold deposits, trusts have lured investors with promises of high returns, and invest in everything from metals to real estate, as well as make loans.
Citic Group Corp., parent of the trust company, was established to support former leader Deng Xiaoping’s market reforms in 1979 by Rong Yiren, who later went on to become a vice president of China. Its businesses now span banking to real estate and oil exploration, with the group reporting directly to China’s cabinet.
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