The insightful presentation was guided by two of the leading organisations involved in the establishment of the newly established Chinese Real Estate Investment Trusts (C-REITs) program. Speakers covered key policy points, structural elements, economic growth objectives and market forecasting. Presenters highlighted the importance of this new financial tool to investors and emphasised the complementarity with China’s economic reform goals and rebooting their domestic economy. C-REITs present an avenue for Australian institutional investors to benefit from China’s ongoing economic growth and development.
ACBC Vic would like to thank event partners King & Wood Mallesons (KWM) for providing expert simultaneous translation by senior associate Andrew Fei and a wrap-up by partner Anne-Marie Neagle. We are also most grateful to Ken Atchison for moderating. This event provided a helpful overview of C-REITs and their utility among China’s dynamic capital market.
Key takeaways from our speakers included:
- China released a public market for real estate investment trusts (REITs) on 30 April 2020, aiming to channel personal savings and private capital into infrastructure projects without overstretching already debt-laden local governments.
- Researchers at Peking University believe the China market could eventually be capitalised at US$1.8trn, dwarfing the rest of Asia-Pacific’s REIT sector.
- The REITs market can help reboot China’s economy, which is under downward pressure amid the COVID-19 epidemic.
- C-REITs provide a new financial tool to investors, on top of stocks and bonds, with increased benefits.
- Low buy-in introduces more people to the property market.
- The C-REIT pilot scheme is based on empirical research done in other jurisdictions ie USA and Singapore.
- Once the pilot program has proven successful, it will be exported to other areas of China’s economy.
- The pilot C-REITs will own asset-backed securities (ABSs), issued by their sponsors.
- There is a large need for infrastructure assets in China and this aligns with economic development national interests.
- The gradual expansion of C-REITs to incorporate real estate will happen eventually leading to further economic growth and stability.
- There has been a great deal of market potential shown,
- “the domestic market is ripe for this type of C-REITs program”.
- C-REITs see an emphasis placed on the rights of investors – aligned with international practice.
- C-REITs must be aligned with Chinese national interests where the emphasis is for high-quality assets.
- Important that the financial sector continues to help improve the economy of China. C-REITs do this by reducing debt risk in the short term and will convert savings into investment capital in the long term.
- C-REITs reduce the leverage at the provincial government level and introduce fresh capital.
- Being less reliant on local government debt can be beneficial for large projects that need to secure finance, ie 5G infrastructure.
- China struggles with not being market-oriented enough. This leads to problems with the allocation of funds and finances – An area C-REITs can help with.
- China wants to see a transition away from property development and sales to a growing focus on the rental market as a pillar of the Chinese economy.
- Sustained high levels of urbanisation of China’s various regions will see an increase in city populations thereby increasing the reliance on the rent market.
- Guanghua School of Management has been assisting the Chinese Government on its C-REITs program for the past 4 years.
- Guanghua School of Management is working with Australia and other developed nations to continue to develop REITs.
- “At the end of the day, the product (C-REITs) must be accepted and loved by investors – market-led”
- If you want to invest there are already avenues – QFII qualification application.