China Orders Surprise Audit of $3 Trillion Trust Industry

China’s top auditor is conducting a review of the $3 trillion trust industry, paving the way for a potential overhaul of a key shadow banking sector where losses on property loans are mounting.

In an unscheduled move, the National Audit Office -- which previously led an examination of bank exposures to Jack Ma’s Ant Group Co. -- has for the past month been inspecting the books of at least 20 trust firms, including the top five, to gauge the risks they pose to financial stability, according to people familiar with the matter.

The firms are being asked to report on ...