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2017 | Book

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Ownership of Trust Property in China

A Comparative and Social Capital Perspective

Author: Zhen Meng

Publisher: Springer Singapore

Book Series : Perspectives in Law, Business and Innovation

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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About this book

This book presents a hotly debated issue concerning the ownership of trust property in China. The book describes various conventional interpretations of Chinese Trust Law submitted by legal scholars and compares diverse approaches regarding the ownership of trust property provided by jurisdictions globally. The book does not directly answer the question “Who is the owner of trust property in China?” Instead, using a social capital perspective, it develops a more practical perspective to explain why Chinese trust business has grown rapidly even in lack of legal certainty regarding the location of ownership of trust property. The book also further predicts under what conditions is the time ripe to clarify the location of the ownership of trust property in China.

By employing those sociological concepts often used to depict and analyze society, this book outlines the structure of the Chinese trust business and related social relations in different stages, i.e., the current rapid development stage, and the possible transitional stage in the near future. The focus is on how the social network structure affects the behavior of actors (such as the settlor, the trustee, and the beneficiaries, and/or their potential candidates) within the relevant section of Chinese society.

The book provides readers with an intensive analysis of the impacts of historical, cultural, and social elements on the legislation and development of trust law in China. It will appeal both to lawyers interested in the Chinese trust business and to comparative law researchers and social scientists.

Table of Contents

Frontmatter
Chapter 1. Introduction
Abstract
The location of ownership of trust property has been an issue of debate among Chinese scholars since Chinese Trust Law was enacted in 2001. Almost every possible interpretation as to this issue has been presented by Chinese lawyers. Under the frustrating circumstances regarding this issue in China, this book describes various conventional interpretations of Chinese Trust Law submitted by legal scholars, and compares diverse approaches regarding the location of ownership of trust property provided by jurisdictions globally. In order to resolve this question, instead of directly answering the question “who is the owner of trust property in China?”, this book develops a new but more practical way to explain what has been facilitating the thriving Chinese trust industry in spite of the ambiguity of the Trust Law, using a social capital perspective. This book also further tries to predicts under what conditions is the time ripe to clarify the location of the ownership of trust property in China.
Zhen Meng
Chapter 2. Trust Law of China and Its Uncertainty Regarding the Location of Ownership of Trust Property
Abstract
This chapter starts with an observation and description of the historical background of Chinese trusts, which is essential to understand why it was necessary for China to enact the trust law in 2001. In Sect. 2.1, it firstly describes the development and problems of trust and investment companies in modern China; and then examines the reasons for the need of trust industry in China before the enactment of the trust law; it also explains why the Chinese legislature considered the trust law as a necessary solution to the further development of trust industry; and finally it describes the legislative procedure of the trust law in China, showing the disputes among legislators during the legislative procedure. In Sect. 2.2, it moves on to outline the origin of trust law in common law system, and the recent trend in the reception of trust in a global context, and then discusses the conflicts between the concept of “trust” and conventional way of thinking by lawyers of civil law jurisdictions. Section 3 of this chapter focuses on Article 2 of Chinese trust law, explaining the practical problems accompanied with it.
Zhen Meng
Chapter 3. “Dual Ownership” Versus “Absolute Ownership”: A Comparative Analysis
Abstract
This Chapter provides a comparative analysis on the diverse approaches in which the civil law countries deal with the issue regarding the ownership of trust property. The basic concepts of the “dual ownership” and “absolute ownership”, and the conflict between these two concepts are elaborated in the first section of this Chapter. Then, this Chapter outlines the different scenarios regarding the ownership of trust property in China. Specifically, it examines various conventional interpretations of Article 2 of the Chinese Trust Law suggested by Chinese legal scholars. Further, this Chapter moves on to explain the approaches adopted by the so-called “mixed jurisdictions” such as Scotland, Quebec, Louisiana, and South Africa; also, the trust laws in East Asian jurisdictions such as Japan, Korea, and Taiwan are overviewed. This Chapter ends with a critical summary of the existing debates.
Zhen Meng
Chapter 4. Social Capital, Trust, and Guanxi (关系)
Abstract
This Chapter begins with a brief introduction of the social capital theory. The explanations of social capital by three seminal figures—Pierre Bourdieu, James Coleman and Robert Putnam, who are considered to have contributed much to the conceptualization of social capital—are reviewed in the first section of this Chapter. At the same time, since Nan Lin has contributed to the theoretical development, devised measurements and conducted empirical research in the areas of social networks and social capital, this Chapter also reviews his point of view on the concept of social capital. Then, this Chapter moves on to another conceptual tool: social trust. It discusses the role of social trust in various terms, especially in economic growth. A pair of relevant concepts, namely “personal trust” and “institutionalized trust”, is explained in the second section. Further, this Chapter elaborates a distinctive notion of Guanxi in China, followed by the explanation on the impacts of Guanxi on the Chinese Business Culture. In light of these concepts, this Chapter proposes a hypothesis which can explain at least a part of the issue on ownership of trust property in China. In addition, a short section in this chapter explains the Social Network theory and the Social Network Analysis.
Zhen Meng
Chapter 5. An Empirical Study on China Trust Industry: Methods
Abstract
This chapter is a description and explanation of the methods how the empirical study was conducted in this research. The analysis presented in this book draws on empirical material from two main sources: documents and face-to-face interviews. In this research, data about the development of trust business is collected from written documents, while the data for the relationship between financial institutions and citizens is gathered from qualitative research (namely, face-to-face interviews). Following a brief introduction of empirical research questions and empirical research methods, this Chapter spends one section to explain the ways in which the data of trust business in China is collected, and spends another section to explain the method to collect data on mutual trust between potential investors and financial institutions in China. This Chapter ends with several important selected results of this empirical research, and an explanation on the limitations of this empirical research.
Zhen Meng
Chapter 6. Current Trust Industry in China: A Dense Network
Abstract
This Chapter analyzes the relevant empirical evidences, and justified the hypothesis addressed in Chap. 4. The first section of this chapter provides statistical evidences for the growth of Chinese trust industry, and also analyzes the business models that are currently taken by Chinese trust companies. Then, the functions of trusts in modern China, which also serve as the engine for the rapid growth of China’s trusts, are explained. Moreover, a social network perspective allows us to identify some other crucial factors for the development of China’s trust business. The current trust industry in China is deemed to base on a dense network, and the evidences are illustrated in this Chapter. Further, this Chapter employs the concepts of mutual trust and network effects to analyze the characteristic of this dense network. Mutual trust plays a substantial role in establishing a business contract between the service providers and consumers. A network effect is the effect that one user of a good or service has on the value of that product to other people. This Chapter suggests that these factors together contribute to the explanation of the booming of China’s trust business in spite of ambiguity of Chinese Trust Law on the location of ownership of trust property.
Zhen Meng
Chapter 7. The Chinese Trust Industry in the Near Future Towards a Sparse Network: From Guanxi to Institutionalized Trust?
Abstract
This Chapter first explains the potential problems of Chinese trust industry from the perspective of both the service providers and the consumers. In this respect, it analyzes the unsustainability of current trust business model, and also illustrates the demand of asset management services, especially family trusts, for Chinese HNWIs. Then this Chapter points out that the Chinese trust network is transforming towards a sparse network. Actors within a sparse network are less likely to have social capital that they can rely on to achieve cooperation. In a sparse network, lack or low degree of mutual trust between actors within the network is more likely to happen. Consequently, trust business in China is facing a dilemma, which is also analyzed in this Chapter. On one hand, there is an increasing demand of trust products for HNWIs; on the other hand, the industry is stepping into the decline stage of the business life cycle. In view of this, this chapter provides a possible justification of Article 2 of Chinese Trust Law; then it explains the reasons why the ambiguity of trust law regarding the ownership of trust property might matter in the near future. Following this is a suggestion on possible solutions that could be provided by the trust law for the potential trust business dilemma.
Zhen Meng
Chapter 8. Conclusion
Abstract
This book submits that the network between active participants of Chinese trust business (including both the service providers and consumers) constitutes a dense network. The high embeddedness of dense network surrounding Chinese trust industry generates social trust between actors in the relevant society that allows the trust business to flourish. However, with the development of metropolitan areas in China, this book predicts that the network between the citizens and the wealth management service providers in China changes from dense network to sparse one. In this circumstance, Chinese trust business would be likely to adapt itself to a dense network through developing institutionalized trust. In a sparse network, actors in the network are more likely to reserve their ownership rights rather than put themselves into risk of losing the ownership of trust property, unless institutionalized trust is built between service providers and potential consumers. This book concludes that the clarification of the location of trust property ownership in Chinese Trust Law would become essential and also practicable. A further proposal of this book is that Chinese trust companies would be obliged to build social trust from potential consumers over time. Only if consumers’ trust in trust companies reaches a certain degree, is the time ripe for the clarification of Chinese Trust Law.
Zhen Meng
Backmatter
Metadata
Title
Ownership of Trust Property in China
Author
Zhen Meng
Copyright Year
2017
Publisher
Springer Singapore
Electronic ISBN
978-981-10-5846-2
Print ISBN
978-981-10-5845-5
DOI
https://doi.org/10.1007/978-981-10-5846-2