CHINA has rolled out a slew of measures to develop real estate investment trusts (REITs), as part of efforts to revitalize existing assets and boost effective investment.

The country will expand the pilot scheme for REITs to cover new energy, water conservation and new types of infrastructure facilities, according to sources at the China Securities Regulatory Commission (CSRC).

China currently allows REITs listings of infrastructure projects such as highways, industrial parks, sewage treatment, storage and logistics, clean energy and affordable rental housing.

Steadily expanding the scope of REITs will maintain the healthy development of the market, channel more incremental capital into the infrastructure sector, and provide more options for investors, according to a report from CITIC Securities.

Besides the expansion to new spheres, the CSRC also plans to increase placements of existing infrastructure REITs.

Since China’s first batch of nine REITs went public in 2020, the REITs market has grown rapidly. By the end of October 2022, a total of 23 REITs had been approved and 20 listed on the Shanghai and Shenzhen bourses — this within the space of just over two years.

The 20 listed REITs have raised a total of 61.8 billion yuan (US$8.68 billion), which is mainly used to address shortcomings in areas such as technological innovation, green development and people’s wellbeing. These recovered funds have helped drive investment in new projects to more than 330 billion yuan.

Infrastructure REITs allow companies to monetize their infrastructure assets and apply the sale proceeds to finance future projects or reduce debts, according to a report by Moody’s Investors Service.

Analysts believe the infrastructure REITs in China will be conducive to efficiently using the country’s high-quality infrastructure assets, forestalling local government debt risks and boosting economic growth.

In the secondary market, the 20 listed REITs saw their total market value reach 70.6 billion yuan at the end of October, with an average increase of 22.93% compared with the public offering price.

For investors, the asset’s operating record and ability to generate positive cash flow —as well as its low relevance to major categories of financial assets such as stocks and bonds — will reduce investment risks.

The limited supply of REITs is also helping attract investors keen to take advantage of what is a limited offering. The three newly listed REITs based on affordable rental properties, for example, were all more than 100 times oversubscribed by investors.

“The move to increase placements of existing REITs will inject vitality into the REITs market by improving the revenue generating capacity of existing assets, and enhancing the valuation of REITs with strong operating capability in the secondary market,” said a bond research team at CITIC Securities. (Xinhua)