Case Study Of Real Estate Trust Product Default

In recent years,Chinese policies continue to tighten,strictly control bank loans to real estate enterprises,seriously compress the financing channels of the real estate industry,so the real estate enterprises fall into a shortage of funds,under such circumstances,the real estate trust arises at the moment,providing a new financing channel for the real estate enterprises.The emergence of real estate trust is conducive to the integration and optimization of resources allocation and promote economic development.In the wake of the outbreak of COVID-19 in 2020,under the multiple effects of the epidemic,China-Us trade friction,and tightening policies of real estate enterprises,China’s real estate industry experienced a huge liquidity crisis,many leading real estate enterprises frequently experienced thunderstorms,and real estate related trust plans also defaulted to varying degrees.In 2021,there were 282 defaults of trust products.Among them,there were 99 defaults on real estate trust products,and the total amount of trust defaults was about 150 billion yuan,among which the default amount of real estate trust products was about 91.7 billion yuan,accounting for61.1% of the total default amount.In 2022,the scale of real estate defaults reached 93.025 billion yuan,accounting for 75.70% of the total scale of defaults,which seriously affected the development of the trust industry,harmed investors’ rights and interests,and caused damage to the market economy.Therefore,it is of great significance to study real estate trust defaults.This paper chooses Shenzhen Longgang Financing pooled Fund Trust Plan of CITIC Trust(hereinafter referred to as Shenzhen Longgang Plan)as a case study,mainly because CITIC Trust is a leading enterprise in the trust industry,which has a high status in the trust industry,and also a large number of trust defaults,among which real estate trust defaults account for a large proportion.The financing amount of Shenzhen Longgang financing plan is the trust project with the largest amount involved in CITIC Trust at present.Meanwhile,the related companies of the financing project are all affiliated companies of Shimao Group,which are the top quality housing enterprises in the real estate industry.Therefore,it is typical to study this case as the research object.In order to better explore the reasons behind real estate trust default and put forward corresponding suggestions,this paper sorted out domestic and foreign literature related to real estate trust default,and on the basis of concept definition and theoretical analysis,carried out a detailed analysis of the main reasons for case default.The analysis results show that the external environmental reasons for the default of Shenzhen Longgang trust plan mainly include:Macroeconomic downturn and tightening policy environment.From the perspective of trust companies,there are defects in product design,decreased management ability,inadequate information disclosure,illegal operation and insufficient risk control ability in the process of trust companies’ management of trust plans.From the perspective of project financiers,Shimao Group had a liquidity crisis,huge debts and difficulties in realising mortgage assets during the trust period.The above two perspectives are the internal factors leading to trust default.Based on the analysis of the reasons,suggestions are put forward for trust companies and financiers.In order to protect the rights and interests of investors,trust companies should strengthen internal management,do a good job in due diligence and information disclosure,strengthen risk control,promote business transformation and improve management ability.Project financiers should strengthen risk management,cash flow management and diversification strategy.The case study also brings enlightenment to the policy regulators and investors.The regulatory authorities should improve the legal system of the trust industry,strengthen the supervision of the real estate industry,strengthen the education of investors,and investors should enhance the awareness of risk prevention.The analysis of this paper provides a reference for other trust companies to carry out real estate trust business,provides a strong supplement for related research on real estate trust,and provides a reference case for preventing default of real estate trust plan.