Chen Zhilong: Ponzi Finance and Shadow Banking Liquidation BeginRecently, Essence Trust, an established listed company, has encountered problems such as overdue payments, thunder-riding projects, and performance reducing. Sichuan Trust also encountered a large number of fatal blows such as thundering on projects and overdue product payments. As a large-scale asset management industry, under the national policy to reduce overall leverage, the trust industry has achieved extraordinary rapid development in recent years due to its wide range of businesses, low capital requirements, flexible business models, and high project profitability. However, in the rapid development of the industry and fierce market competition, the industry threshold has been continuously lowered, and risk control has become increasingly extensive, so that almost all assets can be securitized, trusted and channelized. In the past few years, because of the absence of capital constraints and blindly increasing leverage for development, the fragility of the trust institution system that surpasses the margin of safety has increased. The brutal development of the trust industry and the out-of-control of channel businesses have constituted an important part of China's shadow banking risks. Once a problem occurs in a complex high-leverage trading system, its severity is not measured by degree, but by level. Therefore, whether it is the banking industry or trust and other non-banking fields, it is necessary to have overall plans for individual risks and timely risk isolation to prevent the "chain transmission" of risks from causing faulty collapse, and prevent the viral transmission of panic and risk resonance, which endangers the safety of the entire system.
