China to open REITs market  

Plan to make property investible and lift risk from local governments gets the green light

by Nadeem Xu
China to open REITs market  
Longhai Homeland Estate in Shenzhen Photo: Internet

(ATF) China has announced plans to create a public market for real estate investment trusts (REITs), aiming to channel personal savings and private capital into infrastructure projects without overstretching already debt-laden local governments.

The central government is seeking to ramp up infrastructure investment to revive the Chinese economy, which has been hammered by the coronavirus pandemic and contracted for the first time on record in the first quarter this year.

Until now China has only allowed privately sold quasi-REITs in the real estate sector. Under the new initiative announced by the government, the country will see its first publicly sold REITs, which are investment vehicles backed by income-producing properties and trade like stocks.

"This marks the start of a new era for China's REITs," said Stanley Ching, senior managing director at alternative investment manager CITIC Capital.

REITs help reduce debt risks in the short term, and will convert savings into investment capital in the long term, the National Development and Reform Commission (NDRC) and the China Securities Regulatory Commission (CSRC) said in a joint statement.

The infrastructure REITs pilot project clearly proposes that priority will be given to supporting the six key regions of Beijing, Tianjin and Hebei, the Yangtze River Economic Belt, Xiong'an new area, Guangdong, Hong Kong, Macao and Taiwan, Hainan and the Yangtze River Delta.

REITs, as an internationally accepted allocation asset, has always been blank in China. CSRC said that infrastructure REITs have the characteristics of high liquidity, relatively stable income and strong security. They can effectively revitalize the existing assets and fill the gaps in current financial products. In the long run, they can promote the marketization, standardization and healthy development of infrastructure investment and financing.