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This article examines the intersection of law and finance in the historical development (since 1979) of the concept of trust in China. Compared to the Western model, two key aspects of the Chinese trust remain to be determined, namely: the allocation of the ownership of the trust property and the scope of the beneficial right. Recent attempts by the Chinese legislators to clarify the Trust Law 2001 have led some scholars to speak of 'one law, three regulations'. However, this article argues that the present situation, in which a trust is treated as a two-party contract between settlor/beneficiary and trustee, has proved useful in allowing China's trust industry to continue to grow, while providing an important source of funding for state and local government projects. Drawing on the Legal Theory of Finance, this article argues that the Chinese legislators have built the possibility for flexible enforcement into the Trust Law 2001 and its subsequent interpretation in order to encourage investment, while permitting a stable transition from a 'rule-bound' to a 'law-bound' system, in accordance with the Chinese principle of 'crossing the river by feeling the stones'. In the next phase, the practice of 'absolute payment' (刚性兑付), which is just beginning to receive scholarly attention, will present a potential threat to financial stability as China's trust industry moves towards a tighter definition of trust. [ABSTRACT FROM AUTHOR]