Uncovering ‘Trusts’ in China: Law in Books, Law in Action, and Law in Perception

Abstract This article examines the transplantation and evolution of trust law in China from three perspectives: the trust statute; trust practices; and the prevailing understanding of the trust concept shared across different stakeholders in the trust industry. The Chinese Trust Law adopts a trust structure that embraces the core features of the English common law trust, while an inspection of trust practices and the widespread perception of trusts reveals that significant discrepancies exist among the law in books, law in action, and law in perception in China’s trust regime. In practice, trusts have evolved as a collection of financial businesses monopolised by licensed trust companies, while Chinese lawmakers and regulators share a persistent understanding that the essence of trusts lies in their asset management function. This article argues that the discrepancies derive from China’s business-centred and policy-driven model for transplanting trust law. Under this approach, trusts are developed as financial businesses conducted by licensed trust companies rather than as an autonomous and self-contained legal institution. Instead of being a private law instrument, the Chinese trust regime has been largely shaped by regulators’ policy objectives since its origin. This article identifies the adverse implications of this unique model and makes proposals for the way forward. By uncovering Chinese trusts from different perspectives, this article also offers valuable lessons for other civilian jurisdictions that have imported, or are contemplating the future transplantation of, trusts.