China issued on Monday new proposals to regulate foreign investment in its
real estate sector.
The proposals include an increase in the ratio of registered capital in
property developers' overall investment and restrictions on residential property
purchases by foreign institutions and individuals.
They are part of the government's efforts to regulate China's real estate
market and to improve the efficiency of foreign investment.
The proposals have been jointly issued by the Ministry of Construction, the
Ministry of Commerce, the National Development and Reform Commission, the
People's Bank of China, the State Administration of Industry and Commerce and
the State Administration of Foreign Exchange.
The proposals also provide details on revised regulations regarding building
projects, share structures, loans and foreign exchange sales of foreign-invested
real estate enterprises.
According to the proposals, foreign institutions establishing branches or
representative offices in China and individuals working or studying in China for
more than one year can purchase apartments for their own use.
The proposals also require local governments to monitor foreign investment
entering China's real estate market.
There is some speculation going on in China's real estate market, said Andy
Xie, an economist with Morgan Stanley in Hong Kong.
He says a combination of low interest rates and expectations of further
appreciation of the renminbi have caused torrents of overseas money to flow into
China's real estate sector.
The new proposals will regulate foreign financial investors by raising the
thresholds for foreign investors establishing enterprises or foreign
institutions purchasing residential properties, said Xie.
Wang Xiaoguang, professor with the Macroeconomics Division of the NDRC's
Institute of Economic Research, said the "more than one year" stipulation for
individual buyers will remove small speculators from overseas.
China has taken a series of measures this year to control the real estate
market in response to concerns about excessive foreign investment in this
sector, which has absorbed the most foreign investment in China.
Newly established foreign-invested real estate enterprises increased by 25.4
percent in the first half of this year, compared with the same period last year.
The amount of foreign capital actually used was up 27.9 percent.
Foreign exchange sales of foreign institutions and individuals for purchasing
commercial housing have more than tripled in the first quarter.
Yin Bocheng, a professor with the Fudan University, said it is a common
international practice to try to eliminate real estate speculation by
restricting foreign investment flowing to the sector. He stated that China has
not raised the threshold for foreign investment in the real estate market since
2002.
As fears spread that China's economy is overheated, controls on the real
estate sector are seen as a way to cool it, said Xie. The economy here grew by
10.9 percent in the first half of the year compared to the same period last
year.
