Land and Property Policy News
- Government tightens rules on foreign property investors
Date: 8-Aug-2007 Sources: (Shenzhen Daily)
THE government is tightening its grip once more on foreign investors in Chinese real estate, banning them from borrowing offshore in the latest effort to tame property prices and cool the economy.
The new rule, set out in a circular by the State Administration of Foreign Exchange (SAFE) obtained by Reuters, could squeeze foreign investors who take advantage of lower interest rates outside China.
Some may find it especially difficult to fund projects as the government has told its banks to cut back on loans for the construction industry. The central bank ordered Chinese banks to stop lending for land purchases as far back as 2003.
Property funds operating in China tend to borrow to fund at least 50 percent of a project's value.
The circular, which the currency regulator sent to its local branches in early July but has not yet published on its Web site, also increases red-tape for foreign property investors.
Investors seeking to bring capital into China to set up a real estate company must now go through a lengthy process of lodging documents with the Ministry of Commerce in Beijing - not just with local branches of the ministry.
'What we mean is very clear: First we are targeting foreign real estate firms that are illegally approved by local governments,'a SAFE official told reporters.
China has applied a raft of measures to rein in property investment, including interest rate rises and rules to discourage construction of luxury homes.
Foreign investors must now secure land purchases before setting up joint ventures or wholly owned foreign enterprises in China.
However, funds such as those run by global players ING Real Estate, Morgan Stanley and others are pouring more money than ever into China to tap a middle class hunger for new homes and rising capital values.
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