Special Topic: Financial Perspectives – Focusing on the 2026 Two Sessions

Observations from the Two Sessions emphasize the priority of building a powerful domestic market. By adhering to a domestic demand-driven approach, coordinating efforts to boost consumption and expand investment, and exploring new avenues for domestic demand growth, China can better leverage its advantages as a super-sized market.

A key focus is strengthening the domestic economic cycle. Given the complex and severe external environment, it is essential to maintain the strategic focus of expanding domestic demand.

On March 5, 2026, the Fourth Session of the 14th National People's Congress released the annual Government Work Report, outlining the work for 2026 and defining the primary objectives and tasks for the 15th Five-Year Plan period. The domestic market and the domestic circulation have emerged as central themes for navigating economic pressures.

As a specialized industry that mitigates risks in economic and social development, the insurance sector's value in both underwriting and investment cannot be overlooked. However, insurance capital investment warrants particular attention.

The primary characteristic distinguishing insurance capital from other funds is its rigid duration matching requirement. This means insurance capital cannot focus solely on short-term, high-risk, high-return investments, nor can it accept ultra-long-term investments with very low returns.

Consequently, insurance capital faces strict proportional limits in investment areas like the stock market. Similarly, investments in equities and non-standard assets avoid over-concentration in booming sectors to prevent risk accumulation. In other words, insurance capital must seek a balance within the constraints of investment duration and returns.

It is precisely due to these characteristics of insurance capital that emerging investment categories, notably REITs (Real Estate Investment Trusts), have become a primary pathway for insurers in recent years.

The Mutual Embrace of Insurance Capital and REITs

REITs, or multi-level real estate investment trust funds, originated in the 1960s. China initiated a pilot program in 2020, which gained rapid market acceptance. Currently, China's REITs market primarily consists of public and private offerings.

Following the National Development and Reform Commission's April 2020 notice promoting the regular issuance of infrastructure REITs (public REITs), and subsequent practice, the underlying assets for infrastructure REITs have expanded. They now include not only initial categories like warehousing, logistics, industrial parks, highways, and eco-environmental infrastructure but also areas vital to the national economy and people's livelihoods, such as affordable rental housing, consumer infrastructure, energy infrastructure, water conservancy facilities, municipal facilities, and data centers.

The first batch of nine public REITs debuted in 2021, breaking new ground. According to Wind data, by July 2025, 68 public REIT products had been listed in China, with an issuance scale of 177 billion yuan and a total market capitalization of 204.5 billion yuan.

The value of projects in the aforementioned areas is self-evident. However, the stringent compliance and stable profitability requirements for public REITs have led to relatively slow scale expansion.

In September 2023, the Asset Management Association of China released the "Private Investment Fund Filing Guidelines No. 2 – Private Equity and Venture Capital Funds," introducing the concept of private REITs. In December 2023, the first holding-type real estate securitization product, the "Huatai-CCCC Road Construction Qingxi Bridge Holding-Type Real Estate Asset-Backed Special Plan," was successfully issued on the Shanghai Stock Exchange, marking the formal entry of private REITs into the capital market.

Private REITs, with advantages such as simpler approval processes, absence of exchange trading, more targeted investors, streamlined procedures, lower compliance requirements, and faster implementation cycles, have rapidly grown into the current mainstream. Although their issuance scale is only about half that of public REITs, their development speed far exceeds that of public REITs. Insurance capital is undoubtedly the cornerstone of private REITs. Data from professional institutions indicates that insurance asset management companies have become cornerstone investors in private REITs, holding approximately 45% of positions.

To some extent, the relationship between insurance capital and private REITs resembles a mutual pursuit. Over the past years, central state-owned enterprises (SOEs) or local government financing platforms accumulated infrastructure projects during periods of major development. Under requirements to refocus on core businesses, while some projects were disposed of in bulk, a significant number of assets remain. This situation leaves SOEs and local platforms lacking sufficient funds for reinvestment or for other urgently needed projects related to the national economy and people's livelihoods.

The lower threshold of private REITs compared to public REITs allows insurance capital to participate more conveniently through this product type. The rapid implementation of private REITs helps revitalize these assets. Furthermore, due to the projects' inherent importance to the national economy and livelihoods, insurance capital provides fundamental support for smoothing the domestic circulation. This良性 project structuring also enhances China's economic resilience to a certain extent.

Public Offerings Accelerate to Address Exit Challenges

The path for insurance capital in private REITs is not entirely smooth.

The most typical obstacle is undoubtedly the exit problem. Funds raised for private REITs come solely from qualified investors, who are also the main source of capital in the current market. However, capital seeks profit; exiting with gains, or cashing out at a high point, is a fundamental requirement.

Although provisions such as subordination or repurchase agreements by project holders in private REITs, or the introduction of new investors, serve as safety nets for exits, from a practical settlement perspective, the original project holders often lack the ability to fully repay principal and returns (effectively interest under equity-debt structures). This makes exit a major challenge limiting efficient financing for private REITs projects.

For insurance capital, sustained confidence in REITs is paramount. This confidence can, to some extent, only stem from projects ultimately transitioning to public REITs. A successful public REITs issuance can both mitigate potential risks in invested projects and further bolster investment confidence.

Naturally, achieving a seamless connection between private and public offerings is also a focus for regulators. The idea is that after operating for a period, and once a project's compliance and profitability are verified, a private REIT can convert to a public REIT. This allows investors like insurance funds to exit efficiently, securing returns while also channeling more capital into the real economy.

While the ideal is robust, reality may be lean. First, issuing public REITs involves navigating numerous hurdles. Local development and reform commissions screen projects before recommending them to the National Development and Reform Commission for approval, followed by approvals from the Shanghai or Shenzhen stock exchanges. Each step involves stringent tests of compliance, profitability, and cash flow; one misstep can jeopardize the entire process. Second, even after a successful public issuance, uncertainties remain. Similar to the experience with the New Third Board, initial fervor can be followed by market indifference. If retail investors are not convinced, capital remains locked in. In the current climate where investors are more discerning, the cautiousness threshold for all participants in the process continues to rise. This is precisely why the development speed of public REITs lags far behind that of private REITs.

Strict control over the issuance of infrastructure public REITs is certainly based on the special status of infrastructure in the national economy and people's livelihoods. However, revitalizing capital, channeling it to the real economy, and promoting the internal cycle require substantial, tangible funding. This makes commercial real estate a necessary choice.

In late 2025, the China Securities Regulatory Commission (CSRC) issued the "CSRC Announcement on Launching the Pilot Program for Commercial Real Estate Investment Trust Funds," initiating the pilot for public REITs in commercial real estate effective December 31, 2025.

According to media reports, since the acceptance of the first application on January 29, 2026, project submissions surged within a month. By the end of February, the number of applications reached 14, with proposed fundraising exceeding 41.7 billion yuan, setting new records for the pace and volume of applications in a specific segment of public REITs.

Behind this historic speed may lie the urgency of capital seeking exit through public REITs. During periods of high growth, commercial real estate typically offers stable cash flow (rents). This stable, though not exorbitant, return profile aligns well with the needs of insurance capital, leading to increased holdings. However, in recent years, the withdrawal of well-known retail giants from the market somewhat reflects the current ecology of the commercial real estate sector. Compared to infrastructure, the exit challenge is more pronounced in the commercial real estate market.

As mentioned, infrastructure projects relate to the national economy, people's livelihoods, and economic resilience, while commercial real estate pertains to the smooth functioning of the domestic market. The injection of quality capital revitalizes not only assets that can be taken off balance sheets but also provides support for the micro-level implementation of macro strategies. For commercial real estate, it means that with capital support, upgraded retail spaces can positively contribute to strengthening the domestic cycle and expanding domestic demand.

In other words, revitalizing both infrastructure and commercial real estate is highly significant for implementing the guiding principles outlined in the Government Work Report: strengthening the domestic cycle, building a powerful domestic market, fully unleashing the potential of effective investment, and vigorously cultivating new growth drivers.

Even if public REITs cannot rapidly scale up in the short term to clear exit obstacles for private REITs, capital represented by insurance funds should still consider how to leverage their value within the macro narrative, optimize investment pathways, and contribute to the realization of strategic intentions. This is not only a strategic opportunity worth continuing to explore but also a reflection of the political awareness of insurance companies and their capital.