Scaling into Low-Yield Trust Services: Business-Mix Transformation and Fee Compression in China's Trust Industry

Abstract

China’s trust industry has returned to rapid asset growth, yet the fee income generated by that asset base has continued to contract. This article asks whether the divergence is visible within institutions and whether the post-2023 shift toward standardized asset management and asset-service mandates offers a plausible accounting explanation. I assemble a balanced panel of 12 trust companies with comparable public disclosures for 2021–2025 (60 firm-years). The sample’s year-end assets under management nearly doubled, rising by 95.8%, while fee or trust-business income fell by 42.4%; aggregate fee density declined by 70.6%, and every sample institution recorded a lower density in 2025 than in 2021 (exact two-sided sign-test p = 0.00049). In a first-difference log specification with year effects, the estimated fee-income elasticity with respect to assets is 0.572 (firm-clustered SE 0.187). Exact Rademacher wildcluster inference rejects a zero elasticity (p = 0.0396), while rejection of proportional scaling is borderline (p = 0.0566). The corresponding firm- and year-fixed-effects estimate in levels is 0.714 (SE 0.273) and does not reject unit elasticity. I therefore treat sub-proportional scaling as suggestive rather than definitive. Mechanism evidence is stronger at the accounting level: at Minmetals Trust in 2023, innovative business represented 73.6% of the two disclosed categories’ assets but 16.4% of their trustbusiness income, with an 8.82 basis-point yield versus 125.23 basis points for traditional non-standard business. Corroborating disclosures from FOTIC and China Resources Trust show that recent scale is concentrated in securities, administrative, and other non-financing mandates. The findings recast declining fee density as a business-mix consequence of regulatory transition, not as proof that larger trust companies are less profitable or that the reform caused the decline.

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