Trust but not trustworthy? The bankruptcy of Sichuan Trust

Yang, Chen (2026) Trust but not trustworthy? The bankruptcy of Sichuan Trust. Law and Financial Markets Review. (doi:10.1080/17521440.2026.2626880).

Record type: Article

Abstract

The bankruptcy of Sichuan Trust Co., Ltd. (Sichuan Trust) highlights critical vulnerabilities faced by retail investors within China’s shadow banking sector, arising primarily from limited transparency and inadequate regulatory protections. This paper examines the Sichuan Trust case to explore retail investor vulnerability and to identify regulatory gaps. The paper contends that, while ex post regulatory interventions have facilitated partial restitution for retail investors through structured repayment schemes, the existing ex ante safeguards remain insufficient to prevent such harm in the first place. Drawing from this analysis, the paper advocates for a more proactive regulatory approach emphasising preventive measures, strengthened disclosures, enhanced financial literacy education, and targeted paternalistic protections to ensure retail investor welfare at the pre-investment stage.

Text

Trust but Not Trustworthy? The Bankruptcy of Sichuan Trust - Accepted Manuscript

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