Trust as Resolution Infrastructure: Value Preservation, Creditor Coordination, and Bankruptcy Service Trusts in China

Abstract

Bankruptcy service trusts have become an increasingly common component of large corporate restructurings in China. Among the 144 listed companies whose reorganization plans were approved by courts between 2007 and 2025, the share of plans repaying creditors with trust beneficial interests rose from 4 percent over 2019–2022 to 36 percent in 2024 and 40 percent in 2025. Yet the economic contribution of these trusts is easily misstated: restructuring plans may treat trust units as debt satisfaction while underlying assets remain unmonetized, whereas evaluations based only on immediate cash ignore the value of avoiding forced sales. This paper first develops a two-period model of deferred disposition in which the fire-sale discount, expected asset recoverability, and governance-dependent agency costs jointly determine when a service trust preserves value; four hypotheses follow as comparative statics, including a net-effect boundary for asset complexity. It then combines a censusbased sampling frame compiled from public plan records and professional annual reports, a sourcegraded audit of 20 cases, a focal positive mechanism analysis of the Founder Group restructuring, and a structured comparison of the 2024 listed-company cohort. Of the 20 audited cases, 12 have a verified plan, seven a verified establishment, and only two provide case-level monetary evidence meeting the audit threshold: Bohai Steel reports cumulative cash distributions, while HNA Group’s trust units are reported at a Level 3 fair-value carrying amount in affiliated companies’ audited financial statements. Because realized trust distributions remain sparse, the paper specifies a package-level market-implied recovery measure and an exploratory roadmap of three prospective research designs built on the 2023 trust-business classification reform, the 2024 Supreme People’s Court and CSRC Minutes, and withincase creditor-class variation, stating explicitly the conditions under which each would support causal inference. The evidence to date supports an institutional conclusion: where viable operations can be TRUST AS RESOLUTION INFRASTRUCTURE separated from difficult but potentially recoverable assets, a service trust preserves contingent creditor rights and allows the core restructuring to close without a forced sale. Whether it raises discounted recovery is the empirical hypothesis this design makes testable and auditable.

Author abstract from the research manuscript. Typography and line breaks have been normalized; the linked source may show a different manuscript version.