China Launches Property Investment Trusts To Spur Virus-hit Economy

China on Thursday said it will launch a pilot scheme for real estate investment trusts (REITs) in the infrastructure sector, the latest measure to tap the capital markets for funding to aid a coronavirus-ravaged economy.

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

Launching REITs in the infrastructure space can free up capital for reinvestment, increase direct financing and reduce corporate leverage, the National Development and Reform Commission (NDRC) said in a statement.

REITs also provide a liquid and safe investment tool with stable income for Chinese investors, said the NDRC, China’s top planning agency. It said the pilot would be launched as soon as possible.

China is ramping up infrastructure investment to counter an economic slump triggered by the pandemic that has hit consumption and damaged exports. China’s economy contracted for the first time on record in the first quarter.

China has taken a series of measures to channel much-needed capital into the real economy from stock and bond markets.

Regulators have fast-tracked approval for bond and share sales and kicked off an initial public offering (IPO) reform on Shenzhen’s start-up board ChiNext.

The NDRC and China’s securities regulator have carried out in-depth research into mature REITs market overseas, Thursday’s statement said.

Reuters