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Real Estates in China Heads Downturn

 
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schong719
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Joined: 17 Jul 2006
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PostPosted: Tue Jul 18, 2006 8:11 pm    Post subject: Real Estates in China Heads Downturn Reply with quote

China May Tighten
Property Regulations
For Foreign Investors

DOW JONES NEWSWIRES
July 18, 2006; Page A6

SHANGHAI, China -- China's government is proposing new restrictions on foreign investment in local real estate, its latest attempt to prevent speculative excesses and overheating in the property market.

The draft rules, which were jointly prepared by six government agencies and seen by Dow Jones Newswires yesterday, state that foreign institutions and individuals won't be allowed to buy residential property that isn't for their own use. It wasn't clear how broadly that restriction might be interpreted.

The draft regulations also propose measures that would make financing property purchases more difficult. They would require foreign-funded companies investing more than $10 million in Chinese property to have registered capital of at least half their planned investment.

The draft regulations probably are aimed at reducing flows of capital into China, movements that complicate authorities' attempts to cool an economy growing at more than 10% a year. Expectations that the yuan will strengthen have encouraged foreign investors to buy real estate, which would increase in value as the currency gains, said Yu Yang, an analyst at Guotai Junan Securities.

China's booming property market is under scrutiny from authorities, which last month started requiring higher down payments on home purchases and tightened lending requirements for property developers.

Most observers believe foreign investment in Chinese real estate isn't large relative to the total size of the market, though there has been interest in properties in Shanghai and other major cities. Institutions such as Macquarie Bank Ltd., Morgan Stanley and Goldman Sachs Group Inc. have been among those investing in commercial property in China.

Under the rules, foreign firms would be required to finance at least 35% of a project's total value themselves before they could borrow from commercial banks. Foreign investors that fail to receive official land-use certificates or that haven't paid up their registered capital wouldn't be allowed to borrow at all.
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