Guest of this issue: Liu Qiao, Dean of Guanghua School of Management, Peking University

Produced | Sohu School of Business

Edit | Xu Xiaoqi

Chief Editor | Wang Demin

On June 21, China’s 9 first batch of publicly offered REITs were officially listed. This batch of publicly offered REITs ushered in popularity as early as the subscription stage, with subscription funds exceeding 30 billion, and all of them ended early.

REITs (real estate investment trust funds) are an important means to realize real estate securitization. It is a trust fund that pools the funds of most investors, transfers them to a special investment institution for real estate investment management, and distributes the investment income to investors in proportion.

In 1960, the world’s first REITs were born in the United States. From 2000 to 2016, the average annual yield of US REITs reached approximately 12%. At present, REITs products have been issued in more than 40 countries and regions, and the global market value exceeds 2 trillion US dollars. China’s first batch of public offering REITs is of great significance to China.

What impact does the securitization of REITs have on my country’s capital market? How is REITS different from stocks? How big is the overall market size of China’s REITS in the future? What is the relationship between REITs and real estate? Sohu Finance and Economics “Acknowledge 100 People” talked about this with Liu Qiao, Dean of Guanghua School of Management, Peking University.

Liu Qiao has studied and actively promoted the development of REITs in China for many years. In his view, REITs are a milestone in the development of China’s capital market, equivalent to the full implementation of the registration system, and a great attempt without losers.

Liu Qiao Means, REITs products are between “stocks” and “debts”, It is the fourth major financial asset except stocks, bonds, and cash. It has not only improved the types of Chinese assets, but also brought new choices for Chinese residents in the future investment allocation, which is an important step in advancing the capital market.

Talking about the characteristics of REITs, Liu Qiao said that the cash flow of REITs is relatively stable. Compared with stocks, it is relatively less speculative and more suitable for long-term holding and investment. Especially in a bear market, it is more resilient and its performance is more stable. Under global inflation expectations, REITs have a certain stabilizing effect on residents’ wealth management and obtaining property income. In the United States, REITs have better investment returns than bonds and stocks, and they have lower risks than stocks.

“Assessing whether a financial product is a good asset, we cannot look at the increase in the bull market, but the resilience of the bear market,” Liu Qiao said frankly. He also introduced that the vast majority of REITs’ income must be distributed, and there is a mandatory distribution ratio requirement. Investing in public REITs funds with growth potential is equivalent to sharing the dividends of China’s future economic growth. Liu Qiao also clarified the common misunderstanding of the relationship between REITs and real estate in my country during the interview. He emphasized that real estate is not equal to real estate. In fact, REITs and real estate are two concepts. In the United States, the underlying assets of REITs are only 13.2% related to real estate, and a larger proportion are other assets such as retail stores, hospitals, and industrial plants. How big is the market for China’s REITs? Liu Qiao predicts that if only infrastructure is considered in the short term, R The future market size of EITs will be between 5 trillion and 10 trillion . This scale is not small. After more than 30 years of development, the A-share market has a volume of only nearly 80 trillion. According to his analysis, the market size of mature REITs such as the United States and Japan accounts for about 5% to 15% of GDP. According to this law, China’s GDP is 101.6 trillion, and the volume of China’s REITs will probably reach 4 to 12 trillion in the future. From another perspective, China’s overall infrastructure stock is now 130 trillion yuan. If 5% of the infrastructure stock is securitized, it can reach a volume of 6.5 trillion yuan. “In addition, China’s current REITs’ underlying assets are only infrastructure, and this scope will expand to other areas in the future, so I think the real market size of China’s REITs in the future will be much larger than this number.” Liu Qiao said. Liu Qiao, Dean of Guanghua School of Management, Peking University The following is a compilation of interviews: Sohu Finance: On June 21, 9 public offering REITs went public. How do you expect REITS prices to perform? Liu Qiao: Because the subscription is very active, the price of REITs will definitely increase on June 21st, but the increase cannot be determined because there is a 30% upper limit on the increase. Sohu Finance: What impact will the securitization of REITs have on my country’s capital market? Liu Qiao: Nine infrastructure public offering REITs went public, after 20 years of hard work. The launch of public REITs has three meanings. The first is to build a multi-level capital market. Public REITs have grown from scratch and are the fourth largest financial asset in addition to stocks, bonds, and cash. It has perfected China’s major asset categories and is an important step in advancing the capital market. At the same time, REITs products are between “shares” and “debts”, bringing new choices for Chinese residents’ future investment allocation. Second, public REITs are traded in the secondary market and have the function of price discovery. REITs price is the anchor for market-based pricing of underlying assets , Which is conducive to more effective allocation of resources. Third, public REITs can increase the proportion of direct financing, which is an important measure for the supply-side reform of China’s financial sector. It not only provides another source of funding for future infrastructure investment, but also has great value in improving the efficiency and return of China’s infrastructure investment in the future. REITs are a milestone in the development of China’s capital market. They are equivalent to the full implementation of the registration system. . REITs and the registration system are the most important and only two measures of China’s financial supply-side reform. From this perspective, I am very looking forward to June 21st, and hope that these 9 pilot public offering REITs will be listed with great success. Sohu Finance: You just said that REITs are financial products between stocks and bonds. What is the specific difference between them and stocks? Liu Qiao: The publicly offered REITs in this trial are equity products. From this perspective, they are not debts, and are equity securities like stocks. However, as financial products, REITs have their own specific attributes. For example, the underlying assets are real estate and the cash flow is relatively stable. Its growth depends more on stable cash flow growth. Compared with stocks, it is less speculative and has stronger long-term investment attributes. In addition, The vast majority of REITs’ income must be distributed, and there is a mandatory dividend ratio requirement . According to the research of the US, Singapore, Australia and other markets, the pricing law of REITs is also different from that of stocks and bonds. If various types of financial assets have strong linkages and a high degree of price linkage, the effect of risk diversification will be relatively poor. In the U.S. market, REITs prices have a low correlation with bond prices and stock prices . Therefore, from the perspective of resource allocation, it is a very good configuration field, with greater configuration value. Sohu Finance: The current REITs are only pilot projects, and the fund subscription scale is small. How big do you estimate the overall market size of China’s REITS? Liu Qiao: The mature REITs market in the United States and other countries accounts for about 4% to 12% of GDP. According to this law, China’s GDP is 101.6 trillion, and the volume of China’s REITs will probably reach 4 to 12 trillion in the next few years. This scale is not small. After more than 30 years of development, the A-share market now has a volume of only nearly 80 trillion. In addition, Chinese REITs are not the same as the US and Australian markets. The first batch of our pilots are infrastructure public offering REITs, and the underlying assets are infrastructure. China’s entire infrastructure stock is now 130 trillion yuan. If 5% of the infrastructure stock is securitized, and the final public offering is listed, it can also reach a volume of 6.5 trillion yuan. Moreover, as a large category of financial assets, REITs have relatively stable yields and little price fluctuations. In the United States, REITs have better investment return data than bonds and stocks, and the risk is relatively low. In the future, the scope of underlying assets of China’s REITs will also expand to other areas. Such as rental housing, low-carbon related assets and so on. Including these underlying assets, the scale of China’s REITs will be larger than 6.5 trillion yuan. If only infrastructure REITs are considered in the short term, the market size will be between 5 trillion and 10 trillion. But I think the real market size of China’s REITS will be much larger than this number in the future. Sohu Finance: How to correctly understand the relationship between REITs and real estate? Liu Qiao: People’s There has always been a misunderstanding in the perception of REITs. The English literal translation of REITs is “real estate investment trust fund”. The underlying assets are real estate, not just real estate. The wrong perception of real estate has led people to think that REITs are investment funds with real estate as the underlying assets. The launch of REITs is just another channel for real estate companies and related issuers to provide financing. Therefore, as the Chinese real estate market is facing a structural transformation and controlling housing prices, everyone has a lot of concerns about the launch of REITs. This is one of the reasons why public REITs have not been called out for so many years. It took many years for academics and policy makers to correct their perceptions of REITs. In the U.S., REITs are really only 13.2% of the underlying assets related to real estate A larger proportion is retail stores accounted for 18.28%, hospitals accounted for 10.72%, infrastructure accounted for 13.92%, industry accounted for 7.7%, and other assets such as hotels and data centers. Sohu Finance: What impact does the listing of REITs have on residents’ financial management? Liu Qiao: The value of publicly offered REITs is that they have both financial and real estate attributes, and they are the most typical example of the integration of industry and finance. The performance of REITs in the market depends on the operational capabilities of the management team. Investing in public REITs funds with relatively high quality underlying assets, strong management team operational capabilities, and growth potential is also equivalent to sharing the dividends brought about by China’s future economic growth and the continuous improvement of infrastructure investment efficiency. Sohu Finance: Under global inflation expectations, what are the effects of REITs on residents’ wealth management? Liu Qiao: To assess whether a financial product is a good asset, one cannot look at how much it rises in a bull market, but depends on its resilience in a bear market. REITs have weak volatility and strong anti-cyclical ability. When the economy performs poorly and the financial market is in a counter-cyclical period, the performance is more stable. When allocating assets, REITs are an ideal alternative investment product. Under global inflation expectations, REITs have a certain stabilizing effect on residents’ wealth management. Sohu Finance: How has the US REITs’ yield performance over the years? Liu Qiao: From 2000 to 2016, the average annual return rate of US REITs reached about 12%, which is much higher than the average of the S&P 500. After the 2008 financial crisis, REITs continued to grow in decline, but still surpassed the stock and bond markets. Sohu Finance: The listing of REITs refers to the advancement of the Science and Technology Innovation Board. What impact will it have on the Sci-tech Innovation Board and ChiNext after it goes public? Liu Qiao: As a growing financial market, everyone has high expectations for the follow-up development of REITs. And after sorting out the pilot experience, the scope of the overall underlying assets of REITs will continue to expand. The US REITs market has the largest scale and the longest development time in the world so far, and the scope of the underlying market is very wide.but China’s current REITs’ underlying assets are only infrastructure. In the future, this scope will continue to expand during the development process. I believe that rental housing and carbon-neutral assets will be gradually included. In this case, REITs will eventually become a very important part of the entire capital market. Its size, coverage, support for the real economy, and influence on the capital market will expand year by year. However, when discussing the impact on the traditional capital market, the current REITs are only pilot projects with limited scale.For example, the total volume of the 9 REITs listed this time is only more than 30 billion, and the market value of the A-share market is close to 80 trillion, so So far, the impact of REITs on the stock market is very small . If we only look at the direct price impact or the liquidity impact, the impact of REITs on the Sci-tech Innovation Board and ChiNext will be minimal in the short term. However, the launch of publicly offered REITs is an important measure for the supply-side reform of the financial sector. Its significance is equivalent to the launch of the science and technology innovation board and the implementation of the registration system. The positive impact will gradually become apparent. Sohu Finance: REITs funds have a certain degree of “share nature.” What do you think of the risks that it may bring when trading in the secondary market? Liu Qiao: From the perspective of recruitment and subscription, REITs are highly recognized by market investors. But REITs are not growth stocks in the classic sense, but more like sound investment products. It is less speculative and more suitable for long-term holding and investment. I am worried that everyone thinks it is speculative and thus speculates on the price. If the price rises too sharply, it will bring noise to the steady and sustainable development of public REITs in the future. Investors should have a clear understanding of the pricing rules of REITs and establish a correct investment philosophy, so that the development of REITs can proceed steadily. Sohu Finance: In addition to new infrastructure, what other areas or groups will benefit from REITs? Liu Qiao: From the issuer’s perspective, asset owners included in the scope of the REITS pilot program are definitely beneficiaries, such as highways, environmental water services, industrial parks, logistics, and data centers. However, from the perspective of investors, the long-term significance of the benefits is that REITS public offerings provide public investors with the fourth category of financial assets, enabling the public to invest in real estate and benefit from it. In addition, REITs have stable cash flow, stable yield, and risk between stocks and bonds, which is good for long-term institutional investors. Finally, local governments and platform companies are also major investors in national infrastructure construction. After REITS pilots, the scale will continue to expand, and as the market becomes more and more mature, the future will bring about a radical change in investment philosophy. So local governments are also beneficiaries. In addition, finances can also collect the taxes that occur during the issuance and transaction process of REITS, so public offering of REITS is a great attempt without losers. More interviews are as follows: Liu Qiao: There is a general misunderstanding about REITS in our country, it is not equal to the securitization of real estate investment Liu Qiao: REITs funds are more resilient than stocks in a bear market, and are suitable for long-term stable holding and investment Liu Qiao, Dean of Peking University Guanghua: my country’s provident fund stock is more than 800 billion, and the implementation of rental REITs can build more public rental housing

Author/ Chen Dengxin

edit/ Meng Huiyuan

At the moment, young people are extremely sensitive to funds.

On June 21, 2021, the first batch of nine publicly offered REITs were officially listed, showing a trend of opening higher and lower prices, but all closed up as of the close, with the highest increase of 14.72%.

The so-called public offering REITs are standardized financial products that publicly raise funds from investors to form fund assets and hold infrastructure projects through infrastructure asset-backed securities.

In layman’s terms, it is a special fund that seeks to hold dividends, can be traded freely, and is open to the public.

However, as aborigines of the Internet, young people have different interpretations of new species. They treat publicly-raised REITs as new stocks, and stage a magical scene.

Are REITs and new stocks stupidly unclear?

“It feels like you are playing new stocks, and you can add chicken legs if you win,” Li Pengfei said.

Li Pengfei, who is located in Wuhan, has been working for three or four years. Since he has no plan to buy a house, he has more money on hand, so his financial needs are urgent.

“I heard from my friends that it is good to buy a fund. I watch the market from time to time, and it has risen better than stocks, so just follow.” Li Pengfei told Zinc Scale that he started to contact the fund in mid-June 2020.

Li Pengfei knows little about public REITs.

However, seeing that his friends around him took action, Li Pengfei was naturally unwilling to let others go. After participating in the purchase of Shougang Green Energy, one of the nine publicly-raised REITs, “what needs to be scrambled is the good thing.”

According to public information, Shougang Green Energy originally planned to issue 10 million copies to public investors. A total of 144,091 valid subscriptions were received on that day. The number of valid subscriptions was approximately 682 million, which was 68.2 times the original plan. The placement ratio after the callback mechanism was only 1.76%.

The degree of popularity can be seen. In the call auction stage, Shougang Green Energy opened 20% higher, leading the way among the nine publicly-raised REITs. Li Pengfei looked forward to the future: “We are waiting for the number of boards.” First day performance of nine public offering REITs But I didn’t want to. Not only did it fail to reach the 30% first-day daily limit, but it fell back a lot. “It’s the same to subscribe, and the signing rate is the same. It’s not as strong as new stocks.” Unlike Li Pengfei, Zhao Guangwei has a deeper understanding of public REITs. “Post-95” Zhao Guangwei told Zinc Scale that buying publicly raised REITs is equivalent to becoming a “chartering company” and enjoying the dividends of China’s infrastructure madman. “My landlord’s greatest happiness is collecting rent every day. After rent collecting, I drink tea, listen to music, and watch the sunset. The days have passed by, I really envy.” Zhao Guangwei said that buying public-raised REITs is more out of his heart’s approval. “Pretend that you have real estate.” Nevertheless, Zhao Guangwei chose to sell on the first day. The reason for this is because I am afraid of the chicken feathers after the stir-frying. “The drivers are thinking about jumping off the car. Shouldn’t we run early and wait for the car to roll over?” An industry insider said that the supply of publicly offered REITs is abundant in the later period, and the sharp fall in the premium is a high probability event. Investors must not treat the new stocks of publicly offered REITs that were originally normalized, otherwise they may suffer a big loss. “Every leek will enter the market. Thinking that you are a sickle, you may not escape the fate of being cut in the end.”

REITs are a long-distance runner

In fact, public REITs are not new. As early as 1960, it was born in the United States. The first three public REITs, Winthrop Real Estate Trust, Washington Real Estate Investment Trust, and Pennsylvania Real Estate Investment Trust, still exist in the New York Stock Exchange. However, it has been tepid since then, and it was not until the 1990s that it ushered in a blowout. The reason is that publicly offered REITs enjoy tax care, and then superimposed to change the way of playing, no longer directly hold the property, but enjoy the investment income as a partner. As a result, public REITs have successfully attracted pension funds and other institutions that focus on long-term investment. According to the “Red Star Restaurant” report, the United States has the world’s largest REITs market, accounting for 66.6% of the global market value. The long-term annualized returns from 1980 to 2020 have performed well, outperforming the Dow Jones Industrial Index and basically the same as the S&P 500. . The United States has the world’s largest REITs market Looking at it this way, public REITs are a long-distance runner. It should be noted that, as an imported product, REITs entered China late. According to public information, the People’s Bank of China, China Securities Regulatory Commission and China Banking Regulatory Commission established REITs research groups in 2007, which kicked off the construction of REITs market. . However, for a long time, domestic REITs have existed in the form of private equity, such as Poly Rental Housing REITs and Penghua Qianhai Vanke REITs. From the pilot private placement to the liberalization of public placement, this means that China’s REITs are gradually becoming mature and can contribute more to the Chinese economy. On the one hand, reduce debt levels . Infrastructure, commercial real estate, etc. often require large-scale investment, and the demand for funds is quite large. Under this background, high debt has become a common feature of the industry and has also become the focus of controversy in the capital market. With the help of publicly offered REITs, companies can reduce overall liabilities, reduce leverage, and reduce financing costs, thereby enhancing their overall competitiveness. More importantly, it is to promote the transition from the pursuit of short-term profitability to long-term operation. On the other hand, revitalize existing assets. With the help of publicly offered REITs, infrastructure, commercial real estate, etc. can obtain the liquidity of stock assets through market-based pricing, thereby increasing the utilization rate of stock assets. In this regard, Huatai Securities analysts told Zinc Scale: “Issuing infrastructure REITs products can achieve the effects of revitalizing existing assets, broadening financing channels, reducing local government leverage, and promoting economic upgrading and transformation. This is the direction of policy encouragement.”

Three major uncertainties cannot be ignored

The current public offering REITs are all aimed at infrastructure, and there are no lack of related public utility stocks in A shares. What is the difference between the two? For example, the Shanghai-Hangzhou-Ningbo Expressway REITs and the listed company Nanjing-Shanghai Expressway both belong to the transportation category. The latter’s dividends are stable and show a trend of increasing year by year. The dividend rate of Nanjing-Shanghai Expressway is not high In fact, according to the requirements of the Fund Infrastructure Guidelines, public offering of REITs shall not be less than once a year if the distribution conditions are met, and public utility stocks are usually at most once a year. In addition to more stable dividends, the risk levels are also different. Huatai Securities analysts told Zinc Scale: “Infrastructure REITs are internationally accepted allocation assets, and are typical medium-income, medium-risk financial products. From international experience, infrastructure REITs products are affected by market factors and have relatively large returns. Less. For the majority of investors, soundness, safety, moderate returns, and suitable for long-term holding are the “role positioning” of public REITs as investment products. Stocks are high-risk investment products with high volatility.” Nevertheless, there are still uncertainties in public REITs. First, there are uncertainties in the level of operations. The underlying assets of public REITs are operated by professional companies. Once the project is determined, professional companies will not be easily changed, and the operating level of professional companies is closely related to the level of investment income. This means that the actual operating level of different projects may vary. The problem is that at the beginning of the investment, the level of professional companies is difficult to judge from the surface. Second, there are uncertainties in asset quality. The underlying logic of public REITs is long-term investment, and the requirements for asset quality are more stringent. The selection of the best among the best has become the consensus of the industry. However, the lack of motivation for the listing of high-quality projects has become a contradiction. With the full rollout of publicly offered REITs, the above-mentioned contradictions will gradually deepen. Once projects with insufficient asset quality are mixed in, they may face difficulties such as poor yields and unrepayable loans. Third, there is uncertainty about taxation. From the perspective of the global REITs market, almost all have relevant tax care. However, there is no relevant legal framework support in China for the time being. It is not ruled out that there will be corresponding arrangements or improvements in the future, but at this stage, we still cannot draw conclusions. In any case, public offering REITs are officially on the road. For related companies, there is an additional financing channel and the direction of transition to a service platform; for investors, they can reap stable rental income from real estate and long-term asset appreciation trends, so as to enjoy the dividends of China’s rapid economic development. This is a win-win outcome

Sohu Finance and Economics and “Economics” magazine series of interviews-“Acknowledge 100 People” No. 125 (click to enter the topic)

Guest of this issue: Liu Qiao, Dean of Guanghua School of Management, Peking University

Produced | Sohu School of Business

Edit | Xu Xiaoqi

Chief Editor | Wang Demin

On June 21, China’s 9 first batch of publicly offered REITs were officially listed. This batch of publicly offered REITs ushered in popularity as early as the subscription stage, with subscription funds exceeding 30 billion, and all of them ended early.

REITs (real estate investment trust funds) are an important means to realize real estate securitization. It is a trust fund that pools the funds of most investors, transfers them to a special investment institution for real estate investment management, and distributes the investment income to investors in proportion.

In 1960, the world’s first REITs were born in the United States. From 2000 to 2016, the average annual yield of US REITs reached approximately 12%. At present, REITs products have been issued in more than 40 countries and regions, and the global market value exceeds 2 trillion US dollars. China’s first batch of public offering REITs is of great significance to China.

What impact does the securitization of REITs have on my country’s capital market? How is REITS different from stocks? How big is the overall market size of China’s REITS in the future? What is the relationship between REITs and real estate? Sohu Finance and Economics “Acknowledge 100 People” talked about this with Liu Qiao, Dean of Guanghua School of Management, Peking University.

Liu Qiao has studied and actively promoted the development of REITs in China for many years. In his view, REITs are a milestone in the development of China’s capital market, equivalent to the full implementation of the registration system, and a great attempt without losers.

Liu Qiao Means, REITs products are between “stocks” and “debts”, It is the fourth major financial asset except stocks, bonds, and cash. It has not only improved the types of Chinese assets, but also brought new choices for Chinese residents in the future investment allocation, which is an important step in advancing the capital market.

Talking about the characteristics of REITs, Liu Qiao said that the cash flow of REITs is relatively stable. Compared with stocks, it is relatively less speculative and more suitable for long-term holding and investment. Especially in a bear market, it is more resilient and its performance is more stable. Under global inflation expectations, REITs have a certain stabilizing effect on residents’ wealth management and obtaining property income. In the United States, REITs have better investment returns than bonds and stocks, and they have lower risks than stocks.

“Assessing whether a financial product is a good asset, we cannot look at the increase in the bull market, but the resilience of the bear market,” Liu Qiao said frankly.

He also introduced that the vast majority of REITs’ income must be distributed, and there is a mandatory distribution ratio requirement. Investing in public REITs funds with growth potential is equivalent to sharing the dividends of China’s future economic growth.

Liu Qiao also clarified the common misunderstanding of the relationship between REITs and real estate in my country during the interview. He emphasized that real estate is not equal to real estate. In fact, REITs and real estate are two concepts. In the United States, the underlying assets of REITs are only 13.2% related to real estate, and a larger proportion are other assets such as retail stores, hospitals, and industrial plants.

How big is the market for China’s REITs? Liu Qiao predicts that if only infrastructure is considered in the short term, R The future market size of EITs will be between 5 trillion and 10 trillion . This scale is not small. After more than 30 years of development, the A-share market has a volume of only nearly 80 trillion.

According to his analysis, the market size of mature REITs such as the United States and Japan accounts for about 5% to 15% of GDP. According to this law, China’s GDP is 101.6 trillion, and the volume of China’s REITs will probably reach 4 to 12 trillion in the future. From another perspective, China’s overall infrastructure stock is now 130 trillion yuan. If 5% of the infrastructure stock is securitized, it can reach a volume of 6.5 trillion yuan.

“In addition, China’s current REITs only have infrastructure as the underlying assets, and this scope will expand to other areas in the future, so I think the real market size of China’s REITs in the future will be much larger than this number.” Liu Qiao said.

Liu Qiao, Dean of Guanghua School of Management, Peking University

The following is a compilation of interviews:

Sohu Finance: On June 21, 9 public offering REITs went public. How do you expect REITS prices to perform?

Liu Qiao: Because the subscription is very active, the price of REITs will definitely increase on June 21st, but the increase cannot be determined because there is a 30% upper limit on the increase.

Sohu Finance: What impact will the securitization of REITs have on my country’s capital market?

Liu Qiao: Nine infrastructure public offering REITs went public, after 20 years of hard work. The launch of public REITs has three meanings. The first is to build a multi-level capital market. Public REITs have grown from scratch and are the fourth largest financial asset in addition to stocks, bonds, and cash. It has perfected China’s major asset categories and is an important step in advancing the capital market. At the same time, REITs products are between “shares” and “debts”, bringing new choices for Chinese residents’ future investment allocation.

Second, public REITs are traded in the secondary market and have the function of price discovery. REITs price is the anchor for market-based pricing of underlying assets , Which is conducive to more effective allocation of resources.

Third, public REITs can increase the proportion of direct financing, which is an important measure for the supply-side reform of China’s financial sector. It not only provides another source of funding for future infrastructure investment, but also has great value in improving the efficiency and return of China’s infrastructure investment in the future.

REITs are a milestone in the development of China’s capital market. They are equivalent to the full implementation of the registration system. . REITs and the registration system are the most important and only two measures of China’s financial supply-side reform.

From this perspective, I am very looking forward to June 21st, and hope that these 9 pilot public offering REITs will be listed with great success.

Sohu Finance: You just said that REITs are financial products between stocks and bonds. What is the specific difference between them and stocks?

Liu Qiao: The publicly offered REITs in this trial are equity products. From this perspective, they are not debts, and are equity securities like stocks. However, as financial products, REITs have their own specific attributes. For example, the underlying assets are real estate and the cash flow is relatively stable. Its growth depends more on stable cash flow growth. Compared with stocks, it is less speculative and has stronger long-term investment attributes.

In addition, The vast majority of REITs’ income must be distributed, and there is a mandatory dividend ratio requirement . According to the research of the US, Singapore, Australia and other markets, the pricing law of REITs is also different from that of stocks and bonds.

If various types of financial assets have strong linkages and a high degree of price linkage, the effect of risk diversification will be relatively poor. In the U.S. market, REITs prices have a low correlation with bond prices and stock prices . Therefore, from the perspective of resource allocation, it is a very good configuration field, with greater configuration value.

Sohu Finance: The current REITs are only pilot projects, and the fund subscription scale is small. How big do you estimate the overall market size of China’s REITS?

Liu Qiao: The mature REITs market in the United States and other countries accounts for about 4% to 12% of GDP. According to this law, China’s GDP is 101.6 trillion, and the volume of China’s REITs will probably reach 4 to 12 trillion in the next few years. This scale is not small. After more than 30 years of development, the A-share market now has a volume of only nearly 80 trillion.

In addition, Chinese REITs are not the same as the US and Australian markets. The first batch of our pilots are infrastructure public offering REITs, and the underlying assets are infrastructure. China’s entire infrastructure stock is now 130 trillion yuan. If 5% of the infrastructure stock is securitized, and the final public offering is listed, it can also reach a volume of 6.5 trillion yuan.

Moreover, as a large category of financial assets, REITs have relatively stable yields and little price fluctuations. In the United States, REITs have better investment return data than bonds and stocks, and the risk is relatively low. In the future, the scope of underlying assets of China’s REITs will also expand to other areas. Such as rental housing, low-carbon related assets and so on. Including these underlying assets, the scale of China’s REITs will be larger than 6.5 trillion yuan.

If only infrastructure REITs are considered in the short term, the market size will be between 5 trillion and 10 trillion. But I think the real market size of China’s REITS will be much larger than this number in the future.

Sohu Finance: How to correctly understand the relationship between REITs and real estate?

Liu Qiao: People’s There has always been a misunderstanding in the perception of REITs. The English literal translation of REITs is “real estate investment trust fund”. The underlying assets are real estate, not just real estate. The wrong perception of real estate has led people to think that REITs are investment funds with real estate as the underlying assets. The launch of REITs is just another channel for real estate companies and related issuers to provide financing. Therefore, as China’s real estate market is undergoing structural transformation and controlling housing prices, everyone has many concerns about the launch of REITs. This is one of the reasons why public REITs have not been called out for so many years. .

It took many years for academics and policy makers to correct their perceptions of REITs. In the U.S., REITs are really only 13.2% of the underlying assets related to real estate A larger proportion is retail stores accounted for 18.28%, hospitals accounted for 10.72%, infrastructure accounted for 13.92%, industry accounted for 7.7%, and other assets such as hotels and data centers.

Sohu Finance: What impact does the listing of REITs have on residents’ financial management?

Liu Qiao: The value of publicly offered REITs is that they have both financial and real estate attributes, and they are the most typical example of the integration of industry and finance. The performance of REITs in the market depends on the operational capabilities of the management team.

Investing in public REITs funds with relatively high quality underlying assets, strong management team operational capabilities, and growth potential is also equivalent to sharing the dividends brought by China’s future economic growth and the continuous improvement of infrastructure investment efficiency.

Sohu Finance: Under global inflation expectations, what are the effects of REITs on residents’ wealth management?

Liu Qiao: To assess whether a financial product is a good asset, one cannot look at how much it rises in a bull market, but depends on its resilience in a bear market. REITs have weak volatility and strong anti-cyclical ability. When the economy performs poorly and the financial market is in a counter-cyclical period, the performance is more stable. When allocating assets, REITs are an ideal alternative investment product.

Under global inflation expectations, REITs have a certain stabilizing effect on residents’ wealth management.

Sohu Finance: How has the US REITs’ yield performance over the years?

Liu Qiao: From 2000 to 2016, the average annual return rate of US REITs reached about 12%, which is much higher than the average of the S&P 500. After the 2008 financial crisis, REITs continued to grow in decline, but still surpassed the stock and bond markets.

Sohu Finance: The listing of REITs refers to the advancement of the Science and Technology Innovation Board. What impact will it have on the Sci-tech Innovation Board and ChiNext after it goes public?

Liu Qiao: As a growing financial market, everyone has high expectations for the follow-up development of REITs. And after sorting out the pilot experience, the scope of the overall underlying assets of REITs will continue to expand.

The US REITs market has the largest scale and the longest development time in the world so far, and the underlying market has a very wide range.but China’s current REITs’ underlying assets are only infrastructure. In the future, this scope will continue to expand during the development process. I believe that rental housing and carbon-neutral assets will be gradually included.

In this case, REITs will eventually become a very important part of the entire capital market. Its size, coverage, support for the real economy, and influence on the capital market will expand year by year.

However, when discussing the impact on the traditional capital market, the current REITs are only pilot projects with limited scale.For example, the total volume of the 9 REITs listed this time is only more than 30 billion, and the market value of the A-share market is close to 80 trillion, so So far, the impact of REITs on the stock market is very small .

If we only look at the direct price impact or the liquidity impact, the impact of REITs on the Sci-tech Innovation Board and ChiNext will be minimal in the short term. However, the launch of publicly offered REITs is an important measure for the supply-side reform of the financial sector. Its significance is equivalent to the launch of the science and technology innovation board and the implementation of the registration system. The positive impact will gradually become apparent.

Sohu Finance: REITs funds have a certain degree of “share nature.” What do you think of the risks that it may bring when trading in the secondary market?

Liu Qiao: From the perspective of recruitment and subscription, REITs are highly recognized by market investors. But REITs are not growth stocks in the classic sense, but more like sound investment products. It is less speculative and more suitable for long-term holding and investment.

I am worried that everyone thinks it is speculative and thus speculates on the price. If the price rises too sharply, it will bring noise to the steady and sustainable development of public REITs in the future.

Investors should have a clear understanding of the pricing rules of REITs and establish a correct investment philosophy, so that the development of REITs can proceed steadily.

Sohu Finance: In addition to new infrastructure, what other areas or groups will benefit from REITs?

Liu Qiao: From the issuer’s perspective, asset owners included in the scope of the REITS pilot program are definitely beneficiaries, such as highways, environmental water services, industrial parks, logistics, and data centers.

However, from the perspective of investors, the long-term significance of the benefits is that REITS public offerings provide public investors with the fourth category of financial assets, enabling the public to invest in real estate and benefit from it. In addition, REITs have stable cash flow, stable yield, and risk between stocks and bonds, which is good for long-term institutional investors.

Finally, local governments and platform companies are also major investors in national infrastructure construction. After REITS pilots, the scale will continue to expand, and as the market becomes more and more mature, the future will bring about a radical change in investment philosophy. So local governments are also beneficiaries.

In addition, finances can also collect the taxes that occur during the issuance and transaction process of REITS, so public offering of REITS is a great attempt without losers.