Path Selection Of China's Development Of Real Estate Investment Trust Funds (reits) And Policy Recommendations

With rapid development of China's real estate industry, financing problems of real estate have unveiled. At present, real estate firms heavily rely on banks to finance, while direct financing such as IPO or issuing bonds just accounts for minority of external financing scale. The financing structure not only restrict financing scale but also have bad influence on capital structure, also bring risk to loans service of commercial banks.Facing the mentioned tough financing environment, real estate industry is eager for new financing ways aiming to developing diversified financing system where risk can be diversified. REITs (Real Estate Investment Trusts), which originated from America and contributed much to development of American real estate industry, not only can provide an additional financing channel for real estate corporations, but also disperse risks, give investors low-risk investment opportunities and drive financing market to be more perfect and effective. REITs has been a trend globally and enjoyed outstanding growth in Singapore, Hong Kong and Japan since 21th century and take great part in global real estate financing market.As for China, State Council issued nine financial measures to promote economic development in Dec.2008, in which favoring development of REITs was put forward for the first time. REITs can provide Chinese real estate firms more diversified financing channels and disperse risks, finally, contribute to reform and innovation of real estate finance market.In the paper, the writer did research about developing environment of REITs in China, lessons of REITs development in foreign countries, revelations from successful and failed REITs cases in China. According to detailed analysis, we see China has been ready for developing REITs, but legal &financial environment are not mature enough. As for laws, we should pass special laws about REITs, adjust Corporations Law, Trust Law and Securities Law and issue Industrial Investment Fund Law. As for finance market, we should develop institute investors and specialized talented people, establish system of risk-control, perfect systems of information disclosure and strengthen outside monitoring. As for detailed organization structure and developing model of REITs in China, fund of company type, public offering, close-ended operation, investing on equity are preferred and suggested.