The Cultivation And Development Of Real Estate Investment Trusts In China

Real Estate Investment Trust has developed a lot since it was first established in 1960s. As a tool of asset securitization investment, it focuses on long-term investment and has stable return;therefore it is playing a key role in American capital market now. In the course of its development, there two important reasons: firstly, the tax benefits which allow REITs to pay no tax as a company if it deliver its profit to shareholders as dividend;secondly, the increasing profit deriving from Equity REITs.As an advanced real estate financing tool, it realizes the assets ownership transaction through the transaction of REITs shares, which makes the real estate ownership to be more stable and avoid frequent buying and selling. Thus, the appreciation and depreciation of assets is shown through the increase and decrease of REITs share's price. Therefore, REITs could help to remove frequent trade of real estate, and stable the price as well as adjust the market. On the other hand, REITs collect money from a mass variety of investors, and broaden the finance source of real estate market, which also helps to lower the risk of banks that involve into real estate finance too much.To develop REITs in China has special significance under current circumstances. Real estate market in Chinese mainland has developed rapidly since 1990s. Real estate markets in some regions have already obtained the basic conditions to develop REITs. Commercial properties are in good state in these regions and there are plenty of assets for REITs investment. On the other hand, a lot of investors want to share the profit of a thriving real estate market, but the high price of properties prevents them. If REITs come into being, they could buy REITs shares through which they obtain the property ownership. Because the stability of REITs, it could be a good choice of the Social Security Fund and insurance fund. REITs could improve the liquidity of real estate assets and specialization of property service as well as diversify the investment to lower the risk level.Because of the imbalance of regional development, REITs should start from experimental region where the real estate market and finance are relatively developed. In the course of experiment, certain tax policy should be established and regulation on theestablishment, listing, and transaction should also be adopted. At the beginning of REITs development, the target asset is very important, because the experimental practice will be considered as a model and example, and will give some experience to other practice followed.The city of Shenzhen is the pioneer of China's reform and opening-up, and also the pioneer of innovation. The real estate market of Shenzhen is relatively more developed and regulated;the financial environment of Shenzhen is also outstanding, many financial institutions has branches there, and what' more, one of the only two stock exchanges lies in Shenzhen;thus, Shenzhen is extremely close to Hong Kong, it is convenient for the two cities to conduct intercommunication about REITs experience and some professionals.REITs has already become the trend in China, provided with some basic conditions, we should promote its development. Under the agreement of WTO, various market in China will be opened, if we conduct REITs in advance, we will get a positive position in the competition in the near future;if not, we will loss plenty of good assets to foreign REITs, which will do badly damage to our economic development.