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Distinguished Leaders, Guests, Ladies and Gentlemen,
Good morning! I am glad to attend the First Yangtze River Delta REITs Forum and China REITs Forum 2022 Annual Meeting. Meanwhile, I would like to congratulate on the inauguration of Shanghai Ruisi Real Estate Finance Research Institute. The report to the 20th CPC National Congress profoundly pointed out that we should focus on the real economy to promote economic growth, improve the function of the capital market, increase the proportion of direct financing, and build a modern infrastructure system. In May this year, the State Council issued a document, known as the "No. 19 Document of General Office of the State Council", which is highly regarded by the industry. It calls for further improvement in the efficiency of recommendation and review, and encourages the issuance and listing of more eligible infrastructure REITs projects. Earnestly implementing the important decisions and arrangements of the CPC Central Committee and the State Council, under the leadership of the China Securities Regulatory Commission (CSRC) and the guidance of the National Development and Reform Commission, the Shanghai Stock Exchange (SSE) has actively fulfilled its original aspiration and mission of serving the real economy, and supported all parties to make full use of REITs products. This has effectively revitalized existing assets and formed a virtuous cycle of existing assets and new investments, which contributed to the stability of the economy.
To date, the SSE has issued 15 REITs products, raising a total of 54.1 billion yuan. So far this year, 9 REITs projects have been approved and 3 expansion projects have been accepted on the SSE. With the accelerated regular construction of the REITs market, REITs are taking on new momentum.
On the one hand, creating a broad space for the REITs market's development through the coordinated expansion of assets and funds. Among the REITs approved this year, the types of assets have expanded from traditional infrastructure projects to key areas such as clean energy and government-subsidized rental housing to make up for infrastructure weaknesses, suggesting a steadily widening market breadth. With the publication of REITs expansion rules and the application and acceptance of expansion projects, the REITs expansion has officially started. This opens up the whole process of REITs business and promotes REITs products to further show their long-term strategic value and sustainable development capability as an asset listing platform.
On the other hand, providing a strong impetus for the REITs market's development through the dual drives of market demand and national policies. The issued projects have been widely recognized by investors. For example, the recently launched China Resources Youchao Government-subsidized Rental Housing REIT received 213 times of offline inquiries and 325 times of subscriptions from public investors, setting a new record in subscriptions. Meanwhile, there is a deeper understanding of the positive role of REITs services in stabilizing growth. Relevant ministries and commissions have issued relevant policies on the transfer of state assets and taxation, and governments in Beijing, Shanghai and other places have introduced incentive policies. A wide range of entities, such as central SOEs, provincial SOEs and quality private enterprises, have been involved in the REITs pilot with unprecedented enthusiasm, leading to abundant reserve projects.
Distinguished Guests, Ladies and Gentlemen,
As a major innovation in the infrastructure investment and financing mechanism, public REITs undertake the mission and task of serving the implementation of major national strategies, deepening the supply-side structural reform of the financial sector, effectively revitalizing the existing assets, and promoting the high-quality development of infrastructure. To further achieve the construction goal of the infrastructure REITs market and fully leverage the functions of REITs products, it is required to accelerate the regular development of the REITs market. Taking this opportunity, I would like to share some of my views and insights in this regard.
I. Revitalizing existing assets to promote investment is the goal to substantially improve the quality and efficiency of serving the real economy and major national strategies. Up to now, 23 REITs products have been issued to revitalize existing assets of nearly 77 billion yuan and drive more than 400 billion yuan of new investment in upstream and downstream projects, gradually manifesting the demonstration effect of REITs to revitalize existing assets and rationally expand effective investment. As China's economy faces the triple pressure of shrinking demand, supply shock and weakening expectations, public REITs have a far-reaching significance in stabilizing infrastructure investment, improving infrastructure operation and management, expanding social investment channels and reducing the debt ratio of government and enterprises. Focusing on the goal of revitalizing existing assets and expanding effective investment, we should offer precise and effective support to areas that make up for infrastructure weaknesses, give priority to projects in key areas such as integrated transportation, logistics hubs, large-scale clean energy bases and environmental infrastructure, and primarily support 102 major projects in the 14th Five-Year Plan.
II. Expanding scale is the path to building a REITs market that matches the size of China's economy. Overseas REITs markets typically account for 3-16% of local GDP and 1-8% of stock market value. Given the current scale of China's existing infrastructure of 100 trillion, annual GDP of 100 trillion and stock market value of nearly 80 trillion, the future capacity of the country's REITs market is expected to be more than one trillion, hinting at a huge potential. In order to expand the breadth and depth of the market, we should make active exploration to build a multi-level REITs market, promote the regular issuance of government-subsidized rental housing REITs, and create a government-subsidized rental housing sector of the REITs market. High-quality real estate companies should be encouraged to issue infrastructure REITs based on qualified assets such as warehousing, logistics and industrial parks. The types of assets covered by REITs pilots should be further expanded, and infrastructure projects such as new energy and new infrastructure should be encouraged to pilot REITs.
III. Establishing system is the guarantee to systematically formulate institutional arrangements in line with the characteristics of REITs. A sound system of rules is the basic guarantee of market construction, and a complete supporting system is an important condition for the effective play of market functions. The "mutual fund + ABS" model in the pilot stage is a practical and feasible solution based on China's legal environment and practical needs. In the short term, we should summarize the pilot experience in time, systematically build a regulatory framework for REITs market in terms of issuance, trading, information disclosure, supervision and management, and constantly improve relevant laws, regulations and supporting systems on product positioning, management model and tax benefits. In the medium to long term, we should take into account China's national conditions and draw on international best practices, speed up special legislation, and steadily improve the breadth and depth of the REITs market to promote its high-quality development.
IV. Further stimulating market vitality and developing endogenous momentum through the direction of marketization. We should keep in mind the concept of registration scheme, follow the principles of marketization and the rule of law, promote market entities to play their leading role in project discovery, valuation and pricing, thus achieving "smooth application, reasonable review and stable issuance". At the application end, we should strengthen market organization, keep studying and improving relevant supporting mechanisms and special legislation, and form institutional incentives. At the review end, we should build an open, transparent, efficient and predictable registration and listing review procedure and operation mechanism, centered on information disclosure and guided by investors' demands, and fully disclose important information closely related to investors' investment decisions. At the issuance end, we should continuously expand allocation-style investment institutions, research and improve relevant issuance and trading mechanisms, stimulate market vitality, and maintain the smooth operation of the market.
V. Further optimizing policy environment for the REITs market's development through the key of government guidance. As the guiding institutions, the SSE, the Regional Cooperation Office of the Yangtze River Delta and the Development and Reform Commissions of three provinces and one municipality (Jiangsu Province, Zhejiang Province, Anhui Province and Shanghai) in the Yangtze River Delta have jointly established the Yangtze River Delta Infrastructure REITs Industry Alliance to gather consensus and promote the construction of the REITs market. Next, we will further leverage the role of the alliance, rely on key regions with abundant REITs reserve projects to accelerate the establishment of a comprehensive promotion mechanism led by local governments with the participation of multiple departments, strengthen coordination, institutional guarantee and policy support, solve common problems involved in REITs projects, and ensure the supply of project resources for regular development.
Distinguished Guests, Ladies and Gentlemen!
In the REITs pilots, we have put equal emphasis on development and regulation. With the accelerated development of the REITs market, the top priority today is to gradually formulate institutional arrangements with Chinese characteristics to adapt to the operation law of the infrastructure REITs market. Under the leadership of the CSRC, the SSE will thoroughly review the pilot experience, seriously address the existing problems and shortcomings, and thus promote the healthy development of infrastructure REITs:
First, improving the review mechanism to tighten the entry barrier. We will summarize the pilot experience, refine and improve the requirements for product review and information disclosure that are frequently practiced on toll roads, industrial parks, warehousing and logistics, examine and standardize the rights and responsibility provisions of the governance mechanism, strictly implement the responsibilities of all parties, and effectively tighten the entry barrier. The REITs expert database will be set up to widely absorb advanced research results and lead market development.
Second, going to the front of projects to optimize market cultivation. We will focus on key areas, regions and enterprises supported by the "No. 19 Document of General Office of the State Council", expand cooperation with local governments, strengthen guidance and connection with projects of central and provincial SOEs, facilitate high-quality private enterprises' participation in the REITs pilot, push forward the landing of major landmark projects, and accelerate the launch of new infrastructure projects such as clean energy and IDC.
Third, strengthening market construction to create a favorable ecology. We will gradually explore and establish a valuation management system and an issuance and trading mechanism that better matches REITs, study to launch REITs index, optimize the assessment mechanism for REITs market makers, explore ETF products based on REITs, and steadily expand the functions of SSE Fund Connect platform. We will constantly strengthen our ability to monitor and handle secondary market transactions to safeguard smooth and orderly market operation. By organizing multi-level and wide-coverage investor education events, we will guide investors to establish a rational understanding of the product features and risk-return characteristics of public REITs.
Fourth, improving information disclosure arrangements to urge standardized operation. Centering on asset operation, we will build a disclosure rule system that reflects the characteristics of REITs products, thus improving the pertinence and effectiveness of information disclosure. Centering around "managing assets" and "improving operation", we will strengthen precise and efficient supervision over the quality, operation and management of underlying assets, clarify the integrity responsibility of issuers and the process control responsibility of agencies, and urge all participants to fulfill duties.
