China’s data centres are plugging into Reit-style financing wave

Published Wed, Apr 15, 2026 · 04:25 PM

[HONG KONG] China’s data centre operators are tapping a fast-growing asset-backed security market, raising more than a billion US dollars from investors hungry for higher yields.

The niche funding tool – known as holding-type real asset-backed securities (ABS) – has seen rapid uptake since it was introduced less than three years ago. Almost 70 per cent of total issuance has come in just the past six months, and volumes so far in 2026 have jumped more than tenfold from a year earlier, according to cn-abs.com, which tracks the local ABS market.

Major data centre operators including GDS Holdings, VNET Group and Shanghai Yovole Networks have joined the wave, selling about 9 billion yuan (S$1.7 billion) of the privately-placed products over the past year, the data show.

The unrated securities sit somewhere between traditional ABS and real-estate investment trusts, giving issuers more leeway in payments and fewer regulatory hurdles. Returns are more like dividends – instead of fixed coupons – linked to the performance of underlying assets such as data centres, logistics parks or shopping malls. China has been pushing to diversify funding channels beyond traditional borrowing and public listings.

“This asset class has taken off largely because regulators see it as an effective way for companies to raise money,” said Yao Yu, founder of credit-rating startup RatingDog (Shenzhen) Information Technology Investors such as insurers and securities firms like the product’s relatively stable, higher long-term yields – especially in China’s current low interest-rate environment, he added.

These products typically generate annual distribution rates of around 4 to 8 per cent, backed by rental income that can extend for several decades, according to people familiar with the matter, who asked not to be identified discussing private information.

In many cases, the potential returns can be more than double the average yield on China’s onshore junk-rated corporate bonds, the people said.

The Shanghai Stock Exchange, where about 90 per cent of these securities are listed, did not immediately respond to questions about its outlook for these products or what it’s doing to support investors and drive further growth.

Many of the firms tapping this market have never sold public bonds in the nation’s domestic market. Private-sector companies and those in newer sectors have struggled to issue debt onshore, where investors tend to favour state-backed borrowers.

Data-centre operators are drawn to it because building facilities to support artificial intelligence and cloud computing requires huge upfront investment, but the returns are generated slowly over time. That creates a mismatch between funding needs and cash flows.

The appeal extends beyond the tech sector.

Utilities, including toll-road operators and power producers, remain the largest issuers, reflecting their outsized role in the economy. They are followed by commercial property owners and data-centre operators. Local government financing vehicles – investment arms that fund public infrastructure – have also been active as they’re seeking new funding channels after Beijing tightened scrutiny of local borrowing.

Wuhan Weineng Battery Asset Management, an electric-vehicle battery recycling and energy storage firm backed by Nio and Contemporary Amperex Technology, was among the latest borrowers to tap the market, raising 501 million yuan earlier this year.

A unit of distressed builder Seazen Holdings priced 616 million yuan of such notes late last year and is applying to issue more. The company told investors it aims to raise as much as eight billion yuan through these securities in 2026.

“Fixed-income investors in China have long been struggling in a low interest-rate environment, while issuers have been actively exploring diverse financing channels, so it’s a perfect match,” said Jerry Fang, managing director for structured finance ratings with S&P Global Ratings.

Holding-type ABS offers an alternative as it allows issuers to borrow against tangible assets rather than relying purely on their corporate credit profiles. China Securities estimates that total sales may reach 700 billion yuan in the medium to long term.

Despite the rapid growth, some investors remain cautious as the market is still in its early stages, with limited liquidity and few clear exit options.

“Investors should be prepared for a long-holding period and it’s unclear how sustainable the rental income from these assets will be over time,” said Li Gen, founder of Beijing G Capital Private Fund Management Center.

Still, analysts expect demand to continue growing, especially as China’s digital infrastructure expands. Project financing and ABS have been important funding channels for data centres globally, according to S&P’s Fang. With their capital spending set to increase sharply, operators will seek more convenient financing options.

“The market will most likely continue to boom going forward,” he added. BLOOMBERG