Study On REITs Development Mechanism In China

Real Estate Investment Trust (REITs), one of real estate backed securities, enable individual investor with limited money to invest real estate and share return from it. In essential, REITs is innovation not only in respect of financial product but also financial system. REITs has been fixed and extended the quartos in portfolio against its steady return and lower relativity with other securities and increased dividend since 1960` in the U.S.A. Nowadays, more than 10 countries are developing REITs or quasi-REITs including Japan, Korea, Singapore, Chinese Taiwan and Hongkong. Developing REITs is needed to compete in international finance market for China.Real estate is one of mainstay industry in China. Its investment and finance comes from bank during the past years because other tools, such as company securities and trust, are used under restrictive regulation and scales are limited. REITs can be satisfied with their demand. In another hand, so many potential institutional investors are preparing to anticipate REITs investment. Unfortunately, there is no REITs in China till now.Three puzzles should be solved firstly if REITs is developed in China: first is investing parties; second is investing orientation and last is risk management. This paper studies on how to cultivate Chinese institute investors, how to find the appropriate profit modal and how to construct the comprehensive risk management frame.The study gives the way to provide persistent fund for indemnificatory real estate in China; shows investing orientation and scope of REITs in Tianjin and extends previous study on real estate valuation to decide whether it should be involved in portfolio.