REITs pilot faces three problems.
According to Liu Xinhua, REITs refer to investment funds that collect investors' funds by issuing income certificates, hand them over to professional investment institutions for real estate investment management, and distribute investment income to investors in time. REITs is an important means to transform low-liquidity real estate assets into high-liquidity securities assets, which is of great significance to revitalize real estate stock assets, broaden social capital investment channels, increase the proportion of direct financing, and improve the quality and efficiency of capital market serving the real economy. At present, the China Securities Regulatory Commission and the National Development and Reform Commission jointly launched the REITs pilot project in the infrastructure field, which opened the prelude to the public offering of REITs and laid a practical foundation for further promotion of REITs. However, it faces the problems of complex product structure, too many nesting levels and insufficient legal liability coverage. In order to implement the overall arrangement of the central government on deepening the structural reform of the financial supply side and the requirements of the Central Economic Work Conference on "improving the legal system of the bond market", according to the provisions of the Securities Law, the State Council is authorized to formulate the Measures for the Administration of the Issuance and Trading of Asset-backed Securities and Asset Management Products, and it is suggested that the the State Council Securities Regulatory Authority take the lead in drafting the Regulations on the Administration of Real Estate Investment Trust Funds to provide legal protection for the further development of Real Estate Investment Trust Funds.
Liu Xinhua has also launched a real estate investment trust pilot. On April 30th, 2020, China Securities Regulatory Commission and National Development and Reform Commission jointly issued the Notice on Promoting the Pilot Work of Real Estate Investment Trust Funds (REITs) in Infrastructure. On August 6th, 2020, China Securities Regulatory Commission issued "Guidelines for Public Offering of Infrastructure Securities Investment Funds (Trial)", and officially launched the REITs pilot in infrastructure field. He believes that the launch of infrastructure public offering REITs will help ease the pressure on infrastructure investment; Conducive to promoting the supply-side reform of the capital market; Provide effective support for the development of the real economy; It provides new investment products for investors in China.
Regarding the problems existing in the current REITs pilot, Liu Xinhua said that the REITs pilot has established a legal framework of "publicly raised funds+single infrastructure asset-backed securities" under the framework of the Securities Investment Fund Law, and it is not necessary to modify the basic legal system, so the legislative cost is low. However, it faces three problems: including the complex structure of multi-level nested products, which leads to high management cost and tax revenue of public offering REITs, and the rate of return is diluted layer by layer; The operation of basic assets involves many subjects, such as original owners, asset-backed securities managers and fund managers, which challenges the effectiveness of internal governance. The legal liability provisions of the Securities Investment Fund Law can not fully meet the characteristics of REITs, and it faces the problem of insufficient legal basis when cracking down on REITs-related illegal acts.
Provide legal protection for the development of REITs norms
Liu Xinhua said that Article 2 of the Securities Law, which came into effect on March 1 2020, stipulates: "The measures for the administration of the issuance and trading of asset-backed securities and asset management products shall be formulated by the State Council in accordance with the principles of this Law." This regulation includes asset-backed securities and asset management products into the scope of securities. However, since the issuance and trading of asset-backed securities and asset management products are different from stocks and bonds, the State Council is authorized to formulate specific issuance and trading measures in accordance with the principles of the Securities Law. It is suggested that the management regulations of real estate investment trust funds should be formulated as soon as possible to provide legal protection for the further standardized development of REITs.
Liu Xinhua made three suggestions. First, simplify the product structure of REITs and clarify the rules for direct public offering and listing of REITs. The product structure of REITs can refer to the current asset securitization business, with the cash flow generated by real estate as repayment support. However, in the aspects of registration and issuance, compulsory information disclosure, anti-fraud, investor protection, legal responsibility, regulatory agencies and so on. , should be directly linked with the securities law, strengthen continuous management, prevent and control risks, and protect the legitimate rights and interests of holders.
Second, according to the requirements of "strengthening functional supervision" put forward by the National Financial Work Conference and the provisions of the Securities Law that "the State Council Securities Regulatory Authority shall exercise centralized and unified supervision and management over the national securities market according to law", it is clear that the State Council Securities Regulatory Authority shall exercise centralized and unified supervision over REITs. The State Council securities regulatory authority shall formulate supporting business rules according to the Securities Law and the Regulations on the Administration of Real Estate Investment Trust Funds, effectively regulate the responsibilities, due diligence, planned investment operation and information disclosure of managers, custodians, original obligees, asset service institutions and basic asset appraisal institutions, and implement functional supervision according to law.
The third is to clarify the tax policy of REITs. Asset securitization is a complex business. Under the current tax system in China, REITs face higher tax costs in the establishment and operation of products. Judging from the situation of overseas mature markets, many governments have introduced tax-neutral policies in the establishment and operation of REITs products while formulating REITs laws and regulations to ensure that there is no double taxation. It is suggested to establish and improve the REITs tax support policy system in line with China's national conditions, consider exempting or deferring taxes related to real estate transfer in the process of product establishment, avoid repeated taxation during product operation, and allow REITs investors to apply preferential tax rates.