¹ Adopted at the 21st session of the Standing Committee of the Ninth National People's Congress on 28 April 2001 promulgated and came into force on 1 October 2001.

² These were non-bank financial institutions established to obtain overseas funding through carrying out so-called ‘trust businesses’ for Chinese provincial governments. Although earlier drafts of the Trust Law included provisions governing trust companies, they were excluded from its final form. Instead, Trust Law, art 4 provides that ‘[w]ith regard to trustees that engage in trust activities in the form of trust institutions, the State Council shall formulate specific measures for the organization and administration of such institutions’. Hence, various laws and regulations have been subsequently promulgated to address issues pertaining to trust companies.

³ See L Ho, Trust Law in China (Sweet & Maxwell Asia, Hong Kong, 2003) para 1.01; Hutchens, W, ‘The PRC's First Trust Law: Trusts Without Chinese Characteristics’ (2001) 15 China Law & PracticeGoogle Scholar.

⁴ Law of the PRC on Securities Investment Fund; came into effect on 1 June 2004.

⁵ Trial Measures for Enterprise Annuities and Trial Measures for the Management of Enterprise Annuities Fund; came into effect on 1 May 2004.

⁶ Measures for the Administration of Trust Companies and Measures for the Administration of Trust Companies' Trust Plans of Assembled Funds; came into effect on 1 March 2007.

⁷ DJ Hayton et al (eds), Underhill and Hayton: Law Relating to Trusts and Trustees (LexisNexis Butterworths, London, 2006) art 2.1 [hereinafter: Hayton, Underhill & Hayton]; Gretton, GL, ‘Trusts without Equity’ (2000) 49 ICLQ 599CrossRefGoogle Scholar.

⁸ Under English law, the trustee has legal ownership of the trust property, whereas the beneficiary has beneficial ownership and hence enjoyment of the trust property. By virtue of the trustee's legal ownership, he is subject to various duties, including fiduciary duties and duties of care and diligence. The beneficiaries' beneficial ownership also enables them to assert equitable proprietary claims against the trust property by way of a tracing process.

⁹ See eg de Waal, MJ, ‘In Search of a Model for the Introduction of the Trust into a Civilian Context’ (2001) 12 Stellenbosch Law Review 63Google Scholar; Ho, L, ‘The Reception of Trust in Asia: Emerging Asian Principles of Trust?’ (2004) Singapore Journal of Legal Studies 287Google Scholar.

¹⁰ See eg Tan, Z, ‘The Chinese Law of Trusts—A compromise Between Two Legal Systems’ (2001) 13 Bond Law Review 224Google Scholar.

¹¹ P Lepaulle, Traite Theorique et Practique des Trusts (1932). Lepaulle defines the trust as a legal institution consisting of an estate independent of any legal person. For a discussion of his theory in English, see Gretton (n 7) 608–617. Lepaulle's theory has inspired Mexican trusts law: see Pasquel, RM, ‘The Mexican Fideicomiso: The Reception, Evolution and the Present Status of the Common Law Trust in a Civil Law Country’ (1969) 8 Columbia Journal of Transnational Law 54Google Scholar.

¹² cf Ryan, KW, ‘The Reception of the Trust’ (1961) 10 ICLQ 265, 271CrossRefGoogle Scholar who suggests that the trust patrimony is autonomous rather than ownerless. This means that the trust property is subject in the hands of trustee to a different regime from that applicable to the rest of his property, and thus constituted a segregated patrimony. But this does not mean that the trust property no longer forms part of the patrimony of any person.

¹³ KGC Reid, ‘Patrimony not Equity’ the Trust in Scotland' (2000) 8 European Review of Private Law 427.

¹⁴ Trust Law, art 29: ‘The trustee shall administer the trust property separately from his own property and keep separate accounting books …’.

¹⁵ Quebec Civil Code, art 1261. Cf Louisiana Trust Code, which does not appear to have adopted a patrimony view, §1731: ‘A trust … is a relationship resulting from the transfer of title to property to a person to be administered by him as a fiduciary for the benefit of another’.

¹⁶ The same view may also be applied to the Hague Convention on the Law Applicable to Trusts and on their Recognition [hereinafter: Hague Trusts Convention] which suggests that ‘the trust assets constitute a separate fund and are not a part of the trustee's own estate’ (emphasis added). It is less clear whether the trust property is included in the trustee's private patrimony, with the consequence that there is only segregation within the trustee's one single private patrimony. Professor Lupoi takes the view that this refers to segregation within the trustee's estate only: Lupoi, M, ‘Civil Law Trust’ (1999) 32 Vanderbilt Journal of Transnational Law 967, 980Google Scholar, even though the Hague Trusts Convention also says that they do not belong to the ‘trustee's own estate’.

¹⁷ KGC Reid ‘National Report for Scotland’ in D Hayton, Principles of European Trust Law (Kluwer Law International, The Hague, 1999) 68. See, further, MJ de Waal & RRM Paisley, ‘Trusts’ in Reinhard Zimmermann and Daniel Visser and Kenneth Reid (eds), Mixed Legal Systems in Comparative Perspective: Property and Obligations in Scotland and South Africa (OUP, Oxford, 2004) Ch 27, 839–842.

¹⁸ Trust Property Control Act 1988, s 1 defines a trust as ‘the arrangement through which the ownership in property of one person is by virtue of a trust instrument made over or bequeathed (a) to another person, the trustee, in whole or in part, to be administered or disposed of according to the provisions of the trust instrument for the benefit of the person or class of persons designated in the trust instrument or for the achievement of the object stated in the trust instrument …’. For a general discussion the South African trusts law, see de Waal, MJ, ‘The Uniformity of Ownership, Numerus Clausus and the Reception of the Trust into South African Law’ (2000) European Review of Private Law 439CrossRefGoogle Scholar.

¹⁹ Principles of European Trust Law, art 1 (emphasis added).

²⁰ Smith, L, ‘Trust and Patrimony’ (2008) 38 Revue générale de droit 379CrossRefGoogle Scholar. I am grateful to Professor Smith for granting me a preview of his forthcoming article.

²¹ Hayton, Underhill and Hayton (n 7) Art 9.

²² Trust Law, art 30: ‘The trustee shall handle trust business himself, but may entrust another person to handle such affairs on his behalf where the trust documents provide otherwise or he has to do so for reasons beyond his control.’

²³ Adopted at the Second Session of the Ninth National People's Congress on 15 March 1999, and came into force as of 1 October 1999.

²⁴ Contract Law, art 396.

²⁵ Trust Law, art 14: ‘The property obtained by the trustee due to a trust accepted is trust property.’

²⁶ See Qu, CZ, ‘The Doctrinal Basis of the Trust Principles in China's Trust Law’ (2003) 38 Real Property, Probate and Trust Journal 345, 357Google Scholar. According to this view, despite the wording in article 2, reading it in context, the definition of trust still requires a transfer of property to the trustee.

²⁷ Contract Law, art 404: The agent shall hand over to the principal any property acquired () in handling the entrusted affairs.

²⁸ Trust Law, arts 20–23. Nonetheless, it should be noted that by virtue of art 49, the beneficiary is also granted rights prescribed in arts 20–23. If there is a conflict between the views of the settlor and the beneficiary with regard to the exercise of these rights, the beneficiary may apply to the court for ruling.

²⁹ See eg Re Astor's Settlement Trusts [1952] Ch 534 (Ch D), 542.

³⁰ For example, it is not settlor, who may have access to the trust information in order to render trustee accountable. The debate in English law has always been on the basis on which beneficiaries, not the settlor, may seek disclosure of trust information: Re Londonderry's Settlement [1965] Ch 918; Hartigan Nominees v Rydge (1992) 29 NSWLR 405; Schmidt v Rosewood [2003] UKPC 26; [2003] 2 AC 709.

³¹ Trust Law, art 20 (emphasis added).

³² Law 2007–211 of 19 February 2007 on Fiducie.

³³ The statutory definition of a fiducie is as follows: ‘an operation by which a constituent transfers all kinds of rights to a legal or natural person called fiduciary, the latter having the responsibility of administering these rights or disposing of them in the interest of one or more beneficiaries in accordance with the terms and conditions of the contract for the purposes of management, collateral or transfer for consideration, either exclusively or cumulatively’: unofficial translation in Adelle, JF, ‘French Law adopts Fiduciary Arrangements’ (2007) Butterworths Journal of International Banking and Financial Law 180Google Scholar.

³⁴ P Matthews, ‘The French Fiducie: and Now for Something Completely Different (2007) 21 Trust Law International 17. cf Langbein, JH, ‘The Contractarian Basis of the Law of Trusts’ (1995) 105 Yale Law Journal 625CrossRefGoogle Scholar.

³⁵ ‘Written form shall be adopted for the establishment of a trust. Written form includes trust contracts, wills or other written documents as provided by laws and regulations’. Admittedly, a trust contract is not the only means of creating a trust in China.

³⁶ M Lupoi, Trusts: a Comparative Study (CUP, UK, 2000) 310.

³⁷ The settlor cannot be the trustee at the same time: cf art 43 of the Trust Law: ‘… The settlor may be a beneficiary and may also be the only beneficiary under the same trust. The trustee may be a beneficiary bur may not be the only beneficiary under the same trust.’ By allowing the trustee to be the beneficiary, one may also argue that this is closer to a trust arrangement.

³⁸ Hague Trusts Convention, art 2. But note that as the purpose of the Hague Trusts Convention is to promote recognition of common law trusts in non-trust jurisdictions, the definition of trust is crafted more broadly.

³⁹ Lupoi (n 16) 979.

⁴⁰ It may be argued that Contract Law, art 64 can be viewed as such a provision. Art 64 provides: ‘Where the parties agree that the debtor shall discharge the debts to a third party and where the debtor fails to do so …, the debtor shall bear the liability for breach of contract to the creditor.’ However, art 64 only provides for the debtor's liability to the creditor if he fails to perform its obligations to a third party as agreed; it does not give the third party any independent right of action. Accordingly, it is submitted that the better view is that art 64 does not create a contract for the benefit of third parties, but only a contract whereby the debtor is required by the debtor to perform his obligations to a third party.

⁴¹ See eg Ho (n 9).

⁴² Trust Law, art 17: ‘No compulsory measures may be taken against the trust property unless one the following circumstances arises: (1) where, before the creation of the trust, the creditors enjoyed the priority right to be paid with the trust property and may exercise this right according to law…’; and art 18: ‘The claims arising from the administration or disposition of trust assets by the trustee may not be used to offset the liabilities incurred by the trustee's own property.’.

⁴³ Trust Law, art 22: ‘Where the trustee disposes of the trust property in breach of the purposes of the trust, or causes losses to the trust property due to this departure from his administrative duties or improper handling of trust business, the settler shall have the right to apply to the People's Court for annulling such disposition and the right to ask the trustee to restore the property to its former state or make compensation. Where a transferee of the said trust property accepts the property while knowing the violation of the purposes of the trust, he shall return the property or make compensation.’

⁴⁴ See, generally Scott, AW, ‘The Nature of the Rights of the Cestui Que Trust’ (1917) 17 Columbia Law Review 269CrossRefGoogle Scholar; Waters, DWM, ‘The Nature of the Trust Beneficiary's Interest’ (1967) 45 Canadian Bar Review 219Google Scholar.

⁴⁵ Adopted at the fifth session of the Tenth National People's Congress on 16 March 2007 and came into effect on 1 October 2007.

⁴⁶ Property Law, art 2. ‘Property ownership’ (, caican suoyouquan) is defined under article 71 of the General Principles of the Civil Law of China (adopted at the Fourth Session of the Sixth National People's Congress, promulgated on 12 April 1986, and came into effect on 1 January 1987 [hereinafter: GPCL] as ‘the owner's rights to lawfully possess, utilize profit from and dispose of his property’. For a general discussion of the Chinese system of property rights, see Chen, J ‘Conceptions of Property Rights in the PRC in Historical and Comparative Perspectives’ (1992) 17 Bulletin of the Australian Society of Legal Philosophy 199Google Scholar.

⁴⁷ GPCL, art 84.

⁴⁸ Trust Law, art 43: ‘The beneficiary is the person that enjoys the right to benefit form a trust … ’; art 44: ‘The beneficiary shall enjoy the right to benefit from a trust beginning from the date the trust becomes effective … ’.

⁴⁹ This principle can be justified on the basis of the in rem nature of property rights, whose hidden creation may prejudice third parties, and so should be prohibited to ensure security of transactions and reduce information costs: Hansmann, H and Kraakman, R, ‘Property, Contract, and Verification: The Numerus Clauses Problem and the Divisibility of Rights’ (2002) 31 Journal of Legal Studies 373CrossRefGoogle Scholar. See, further, TW Merrill and HE Smith, Optimal Standardization in the Law of Property: The Numerus Clauses Principle, (2000) 110 Yale Law Journal 1; B Rudden, ‘Economic Theory v Property Law: The Numerus Clausus Problem’ in J Eekelaar and J Bell (eds), Oxford Essays in Jurisprudence: 3rd series (Clarendon Press, Oxford, 1987) 237, 249–63.

⁵⁰ Thus, it may be argued that the Property Law also echoes the ‘entrustment’ view of property holding in the Trust Law.

⁵¹ Smith (n 20).

⁵² T Honoré, ‘Trusts: the Inessentials’ in J Getzler (ed) Rationalizing Property, Equity and Trusts: Essays in Honour of Edward Burn (OUP, Oxford, 2003) 17–19 [hereinafter: Honoré, ‘Trusts: the Inessentials’]; Gretton (n 7) 603–608. In a similar vein, Smith points out that ‘equitable ownership’ is merely a metaphor, and insofar as it suggests that there is a direct relationship between the beneficiary and the trust property, it is inaccurate: Smith (n 20).

⁵³ T Honoré, ‘Ownership’ in T Honoré in Making Law Bind: Essays Legal and Philosophical (Clarendon Press, Oxford, 1987) Ch 8 at 162 [hereinafter: Honoré, ‘Ownership’].

⁵⁴ Criticized by Professor Penner who defended the view that ownership relates to exclusive use and possession of a particular thing: JE Penner, The Idea of Property in Law (Clarendon Press, Oxford, 1997) 152.

⁵⁵ Honoré ‘Ownership’ (n 53) 162–179. This is, according to Honoré, an account of the ‘liberal concept of full individual ownership’. Note that the Property Law seems to have adopted this conception of ownership: see eg Property Law, art 39: ‘Owners of immovables or movables shall be entitled to possess, use, benefit from and dispose of the immovables or movables according to law.’

⁵⁶ Also known as the ‘ultimate residuary right’ in the thing owned. This incident is necessary so that, for example, where a person grants the bailee the right to possess, he remains the owner by virtue of retaining an ultimate residuary right in the thing owned that corresponds to the lesser interest that has been granted: see Honoré, ‘Ownership’ (n 53) 175–179. However, this necessary condition cannot be found in the context of split ownership. In such a situation, it is difficult to locate who the owner is, because ‘an ultimate residuary right is not coupled with present alienability or with the other standard incidents [of ownership]’.

⁵⁷ T Honoré, ‘Property and Ownership: Marginal Comments’ in T Endicott and others (eds) Properties of Law: Essays in Honour of Jim Harris (OUP, Oxford, 2006) Ch 7 134 [hereinafter: Honoré, ‘Property and Ownership’].

⁵⁸ Campbell, K, ‘On the General Nature of Property Rights’ (1992) 3 King's College Law Journal 7990Google Scholar.

⁵⁹ Honoré does not deal with the situation of split ownership in detail, or the question whether the persons interested should still be called the owner: see Honoré ‘Ownership’ (n 53) 176. Rather, he proffers a more pragmatic solution that in any case, even if ownership of the assets is vested in the trustee, the trust assets must still be separated from the trustee's private assets in order that the beneficiaries can be protected. His ownership, consequently, is different from the standard incidents of ownership. It is the function of split ownership (separation of management and enjoyment), not terminology or origin, that is crucial. It is only for convenience purpose that title/ownership vests in the trustee: Honoré ‘Trusts: the Inessentials’ (n 52) 9–11.

⁶⁰ Honoré ‘Property and Ownership’ (n 57) 137; ‘Trusts: The Inessentials’ (n 52) 9.

⁶¹ This is similar to R Nolan, ‘Equitable Property’ (2006) 122 LQR 232.

⁶² Although it seems that the trustee's spouse is not so bound and the beneficiary's interest does not survive the divorce of the trustee.

⁶³ See also Lupoi (n 36) 183–193; 224.

⁶⁴ Smith (n 20).

⁶⁵ While the requirement of knowledge is the subject of debate in English law, this provision does not explain in detail the meaning of knowledge or notice. Further, note that while English law allows tracing (the process of identifying the asset into which a previous asset has been transformed) to support far-reaching proprietary claims against the traceable proceeds, there is no such concept in the Chinese Trust Law.