Economy Sep 30

China accelerates launch of REIT projects

Shanghai and Shenzhen stock exchanges are working with securities regulators and top officials at the NDRC on pilot real-estate-investment-trust projects, possibly involving quality assets near key rail lines

China accelerates launch of REIT projects
Engineers and construction personnel work on a rail bridge in western China. A senior national rail official has said they are selecting high-quality assets in several assets for REITs pilot projects, while official sort out regulatory issues. This is the latest in a series of reforms being undertaken to spur the economy after it was hit hard by the coronavirus and worsening ties with states in the West. Photo: AFP.

(ATF) The pilot public offering of Real Estate Investment Trusts - better known as REITS - has “quietly entered the countdown period" in China, according to the China Securities Journal.

At the China REITs Forum 2020 meeting, jointly hosted by the Shanghai Stock Exchange and others on September 27, Chen Fei, director of the Corporate Bond Supervision Department of the China Securities Regulatory Commission, revealed the news that China will launch REITs.

A real estate investment trust or REIT, is basically a mutual fund that buys real estate instead of stocks.

REITs have a special tax status that requires them to traditionally pay 90% of their profits back to shareholders as a dividend. But China has yet to announce the dividend percentage its real estate investment trusts will have to pay.

Chen Fei's department is working with the China Securities Regulatory Commission, plus Shanghai and Shenzhen Stock Exchanges, while relevant securities regulators are working with the National Development and Reform Commission and other related departments.

“We will do a good job in recommending and screening public REITs pilot projects. Some provincial and municipal development and reform commissions have successively started project application work, and projects will be reported to the National Development and Reform Commission (NDRC) in the near future,” Chen said.

At the meeting last week, Huang Min, deputy general manager of China National Railway Group, revealed that during the pilot phase, high-quality assets among the three railway lines - the Shanghai-Hanrong Railway Hubei Section, Yuehai Railway Ferry, and Guangzhou-Zhuhai Intercity Railway - will be selected initially to carry out REITs pilot projects.

Zhu Weiqiang, vice president of Lingang Group, said that Lingang Group will participate in China’s infrastructure public offering REITs pilot program and strive to be in the first batch of pilot projects.

As organizer of the conference, the Shanghai Stock Exchange's preparations for the pilot public offering of REITs have attracted attention.

Cai Jianchun, general manager of the Shanghai Stock Exchange, said current reserves of the Shanghai Stock Exchange cover many provinces and cities, and the areas mainly involve public utility infrastructure, transportation energy, industrial parks, warehousing and logistics, and data centers, including UHV, "smart energy", and "smart cities". New infrastructure such as, information networks are also likely to be included.

“Currently, the progress of the pilot projects has accelerated. Local Development and Reform Commissions, the State-owned Assets Supervision and the Administration Commission, taxation departments, and competent authorities will actively participate in the communication and coordination of REITs projects. At the same time, among social security funds, insurance funds, pension funds and foreign investors' enthusiasm is gradually improving," Cai Jianchun said.