China Drives Progress on Publicly Offered Infrastructure REIT Trials

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Chinese authorities are further advancing work on trial schemes for the publicly offered infrastructure real estate investment trusts (REIT) that were announced in the first half of 2020.

The Shanghai Stock Exchange and Shenzhen Stock Exchange recently issued a raft of ancillary regulations on infrastructure REIT trials for the solicitation of opinions from the public, according to an 11 September report from People’s Daily.

In early September the Development and Reform Commissions of multiple Chinese cities including Beijing and Shanghai also opened applications for projects to participate in the trials.

Analysts say the formulation of the new regulations and further progress on trial project applications signals the imminent launch of the REIT trials.

Zhou Yisheng (周以升), vice-chair of the Tsinghua PBCSF Property Finance Research Centre (清华五道口不动产金融研究中心), said that China’s REIT trials would differ from mainstream international REIT practice in two key areas:

  1. The type of underlying assets, with China’s REIT trials confined to infrastructure, and the international REIT market focusing more on commercial property initially before subsequently expanding to infrastructure assets;
  2. China’s REIT trials will make use of a “publicly offered fund + ABS” structure, while the international REIT market primarily makes use of a company model or single-level contract structure.

Zhang Zheng (张峥), pro­fes­sor at the Peking Uni­ver­sity Guanghua School of Man­age­ment, previously said that the launch of in­fra­struc­ture REIT tri­als is a mile­stone event for Chi­na’s REIT sec­tor.

On 30 April the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion (CSRC) and the Na­tional De­vel­op­ment and Re­form Com­mis­sion (NDRC) jointly is­sued the “No­tice Con­cern­ing Con­cern­ing Work in Re­la­tion to Ad­vanc­ing In­fra­struc­ture Real Es­tate In­vest­ment Trust Tri­als” (关于推进基础设施领域不动产投资信托基金(RE­ITs)试点相关工作的通知).

Ac­cord­ing to the No­tice CSRC and NDRC will “fully make use of cap­i­tal mar­kets to ac­tively sup­port the un­der­tak­ing of REIT tri­als for high-qual­ity in­fra­struc­ture in key ar­eas and in­dus­tries in ac­cor­dance with the prin­ci­ples of the mar­ket and rule of law.”

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