BEIJING, Sept 18 - The involvement of two Chinese state-owned financial firms in Zhongrong International Trust Co's operations and management may diffuse risk at the troubled shadow bank but does little to ease concerns about missed payments, analysts and investors said.
Zhongrong said in a statement late on Friday it had signed an agreement with Citic Trust and CCB Trust - the shadow banking arms of two state-owned firms Citic Group and China Construction Bank - for so-called"entrusted management services". The latest development was a standard procedure used by Beijing to diffuse risks at troubled shadow banks in recent years, said a senior executive at a Beijing-based research firm, who declined to be named due to sensitivity of the matter.
Under the agreement, Citic Trust and CCB Trust will examine Zhongrong's current operations and help the firm come up with a repayment plan, said sources, who were briefed by the Zhongrong staff and declined to be named due to the sensitivity of the matter. Analysts have said a wave of defaults on trust products could cause substantial ripple effects for China's broader economy as losses suffered by individual investors, lured by higher returns, would have an acute impact on consumption.
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