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On January 29, SZSE officially released three sets of supporting rules to ensure smooth implementation of pilot projects of publicly offered infrastructure REITs, standardize the listing review, continuous regulation and trading operations of publicly offered infrastructure REITs, and protect investors’ legitimate rights and interests. These rules are the Measures of Shenzhen Stock Exchange for Publicly Offered Infrastructure Securities Investment Fund Business (Trial), the Guidelines No. 1 of Shenzhen Stock Exchange for Publicly Offered Infrastructure Securities Investment Fund Business: Review Considerations (Trial), and the Guidelines No. 2 of Shenzhen Stock Exchange for Publicly Offered Infrastructure Securities Investment Fund Business: Placement Business (Trial). The release of those supporting rules marks the beginning of a new phase of the pilot projects of publicly offered infrastructure REITs, another step closer to the listing of the first publicly offered infrastructure REITs on the Chinese market.
Publicly offered infrastructure REITs are an important embodiment of the capital market’s services for the reform of infrastructure investment and financing mechanisms
Standing at the historical junction of achieving the Two Centenary Goals, the Fifth Plenary Session of the 19th CPC Central Committee has charted the blueprint for China’s economic and social development during the 14th Five-year Plan period, which has raised new and higher requirements on the development of the capital market. The Proposals of the CPC Central Committee on Formulating the 14th Five-year Plan for National Economic and Social Development and the Long-range Objectives for 2035 reviewed and adopted in November 2020 requires increasing the proportion of direct financing, and planning and advancing infrastructure construction as a whole.
The Action Plan for Building a High-standard Market System recently distributed by the General Office of the CPC Central Committee and the General Office of the State Council requires reducing the financing cost of the real economy. Publicly offered infrastructure REITs are an effectively policy instrument to implement the decisions and plans of the CPC Central Committee and the State Council on preventing risks, deleveraging, maintaining stable investment and improving areas of weakness and a major innovation in investment and financing mechanisms. And they are of great significance to supporting implementation of key national strategies, deepening the financial supply-side structural reform, and further improving the capability of the capital market in serving the real economy.
Publicly offered infrastructure REITs can introduce long-term, equity funds for construction of infrastructure projects in China, help put existing assets into better use, and relieve debt pressure. They can also provide a source of funds for construction of new infrastructure projects, fully energize market participants, and further improve the efficiency of financial services for the real economy. In the meantime, as an investment variety between stocks and bonds, publicly offered infrastructure REITs are featured by excellent liquidity, stable return and strong safety, which can help enrich investment varieties on the capital market and expand investment channels of social capital.
The development of the Guangdong-Hong Kong-Macao Greater Bay Area and the Pilot Demonstration Area of Socialism with Chinese Characteristics has brought great opportunities to the development of publicly offered infrastructure REITs
The Outline of the Development Planning for the Guangdong-Hong Kong-Macao Greater Bay Area issued by the CPC Central Committee and the State Council in February 2019 requires accelerating financial opening-up and innovation and vigorously expanding direct financing channels. The Implementation Plan for Comprehensive Pilot Reform in Shenzhen to Build the City into a Pilot Demonstration Area of Socialism with Chinese Characteristics (2020-2025) announced by General Office of the CPC Central Committee and the General Office of the State Council in October 2020 clearly points out that, support should be provided for Shenzhen in carrying out pilot projects of infrastructure REITs on the capital market in accordance with laws and regulations.
Carrying out pilot projects of publicly offered infrastructure REITs is one of the important content of implementing the comprehensive pilot reform of the Pilot Demonstration Area of Socialism with Chinese Characteristics. It is also an important reform task to put in place General Secretary Xi Jinping’s important speeches on Guangdong and Shenzhen and the guiding principles of his important instructions, advance reform and opening up with a higher starting point, a higher standard and a higher goal centering on the Pilot Demonstration Area of Socialism with Chinese Characteristics which is Shenzhen’s strategic positioning, strategic target and historical mission entrusted by the CPC Central Committee in a new era, and promote high-standard circulation of technology, capital and the real economy.
The Guangdong-Hong Kong-Macao Greater Bay Area and the Shenzhen Pilot Demonstration Area of Socialism with Chinese Characteristics are key regions that support pilot projects of publicly offered infrastructure REITs, because they have first-mover foundation and advantages to develop an infrastructure REITs market. After policies on pilot projects are released, relevant local governmental departments, enterprises, market institutions, etc. in the two areas have responded quickly, strengthened connection with SZSE, and reserved a batch of quality projects in the fields of transportation, industrial park, warehousing logistics, municipal facilities, etc.
SZSE strengthens rules and technology guarantee to build a REITs market ecosystem with high standard
Under the unified leadership of China Securities Regulatory Commission (CSRC), SZSE has seized key opportunities presented by the development of the Guangdong-Hong Kong-Macao Greater Bay Area and the Pilot Demonstration Area of Socialism with Chinese Characteristics. We have obtained support from various parties, accelerated the implementation of the capital market’s tasks in support of the development and reform of the Pilot Demonstration Area of Socialism with Chinese Characteristics, and spared no effort to advance pilot projects of publicly offered infrastructure REITs.
Since the launch of the pilot work, SZSE has advanced relevant work in a steady and orderly manner. So far, supporting business rules were officially released on January 29, regulatory regulations are complete on the whole, and technology systems are ready for use. We are continuously following up on market training, investor education, subsequent subject research, etc. and are ready to accept applications of first pilot projects. In the meantime, we have strengthened connection to local competent departments at all levels, as well as market buyers and sellers and intermediaries through visit, seminar, publicity, training, etc. A batch of projects in the fields of logistics and warehousing, transportation, industrial park, sewage and waste treatment, data center, energy, power generation, etc. are reserved, some of which have been recommended by local development and reform commissions to the National Development and Reform Commission to participate in the selection debate for pilot projects.
Next, first, SZSE will go all out to do well in the review, placement, listing and regulation of projects, strictly control project quality, and strengthen comprehensive, consistent, scientific and effective regulation, to ensure the pilot work has a good and steady start. Second, SZSE will pay attention to the cultivation of professional institutional investors, promote expansion of investor groups, refine the trading mechanism, and strive to improve the liquidity of the secondary market. Third, SZSE will continue to explore and promptly sum up experience in the pilot work, push for improvement in relevant supporting policies such as tax policy, policy on transfer of state-owned assets and investment policy, and reduce the financing cost of the real economy, to lay a solid foundation for subsequent healthy development of REITs.
SZSE has always been attaching great importance to the research and innovation of REITs. We have successively launched a number of benchmarking projects on the Chinese market, including the first private REITs “CITIC Qihang”, the first REITs with publicly offered funds as carriers “Penghua Qianhai Vanke REITs”, the first private logistics warehousing infrastructure REITs “CITIC-ChinaAMC Suning Yunxiang”, the first private house leasing REITs “CYPA”, the first private public talent rental housing REITs “SCGC Housing Group”, the first private outlets REITs “Capital Grand Outlets”, the first private highway infrastructure REITs in the central and western regions “Sichuan Highway Longchang-Naxi Highway”, and the first private bridge infrastructure REITs “CCCC Qingyuan Bridge”.
So far, SZSE has launched 50 private REITs with an issue volume of over CNY 100 billion, accounting for nearly sixty percent of the market. The underlying real estate covers commercial property, house leasing, highways, bridges, logistics warehousing and industrial parks. A characteristic REITs segment has initially taken shape, which is the largest of its kind in China, covers all real estate types, has strong market leading effect and gathers diversified investors. Over the past three decades, SZSE has developed innovation capital market, product and technology systems with unique advantages, which have provided a better ecological atmosphere and environmental foundation for implementation of pilot projects of publicly offered infrastructure REITs.
Currently, SZSE is earnestly implementing the guiding principles of the Fifth Plenary Session of the 19th CPC Central Committee and the Central Economic Working Conference, carrying out the working concepts of “openness, transparency, integrity and impartiality” in all work, and continuing to put in place the general principle of pursuing progress while ensuring stability. With a correct grasp of the new development phase, SZSE is implementing the new development philosophy in depth, and actively advancing the formation of the new development pattern. Moreover, SZSE is continuously improving basic systems, focusing on increasing the proportion of direct financing, actively serving the development of the Guangdong-Hong Kong-Macao Greater Bay Area and the Pilot Demonstration Area of Socialism with Chinese Characteristics, and sparing no effort to promote the stable and sustained implementation of the reform and development of the capital market.
