China's plans to introduce real estate investment trusts (REITs) mark a crucial step to get private money to fund infrastructure such as toll roads and sewage systems, but authorities have their work cut out in creating a fully-fledged market.
SHANGHAI/BEIJING - China’s plans to introduce real estate investment trusts mark a crucial step to get private money to fund infrastructure such as toll roads and sewage systems, but authorities have their work cut out in creating a fully-fledged market.
The test, say experts, is whether Beijing is able to develop a more market-based means of financing future growth, which evolve only slowly but has the advantage of enlarging the pool of available capital and weaning off inefficient state players. “In the foreseeable future, for example, in the next 5 years or so, I don’t think the scale will be too large. Just a dozen products nationwide initially,” Zhang said.
Yet, experts say developing a market even a tenth of that size would first need authorities to address some fundamental issues. Infrastructure funded through public-private partnerships , which have to date led China’s efforts to attract private investors, usually yield at best between 5% and 6%, compared to between 12 and 15% for those in Western economies, according to Zhang.
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