Would the reputation and behaviour of the Chinese stock exchange be a disincentive to investors considering a Chinese REIT?

China has drawn the world’s attention with the emergence, rapid growth and increasing maturity of itsreal estate market in the past twenty years. Currently the world’s third largest economy, China wasthe second largest Asian country for commercial property transaction capital flows in 2006 (JLL,2007). International investors have recently shown considerable interest regarding propertyinvestment in China, via both direct and indirect property and changes to the rules governing internalfunds are likely to initiate high levels of effective demand from domestic institutions too. China is yet todevelop a Real Estate Investment trust (REIT) market; despite this investment demandencouragement for development of pilot REITs by the PRC government has waxed and waned withpolitical imperatives to manage market and economic volatility. Chinese REITs would theoreticallyprovide the opportunity for investors to access Chinese “property” returns with liquidity and flexibilityand might further play a significant role in stabilising the Chinese capital market in the medium andlong term.The purpose of this paper is to examine whether the reputation and behaviour of the Chinese stockexchanges is a disincentive to investors considering a Chinese REIT. This is addressed firstly byassessing Chinese stock market volatility compared to that of the Hong Kong and Singapore stockexchanges. Secondly, a survey was used to explore Chinese domestic investors’ attitudes toinvestment in Chinese property REITs and their preferences amongst the three main Asian stockexchanges where Chinese REITs might potentially be available.