China may restrain foreign investment in real estate
(Bloomberg)
Updated: 2006-06-23 09:24
China plans to restrict purchases of real estate by foreign investors to
reduce speculation and prevent a property bubble, a government official said.
New rules defining what type of overseas investor can buy property may be
announced this month, Lin Zheying, deputy director general of the commerce
ministry's Foreign Investment Administration, told reporters in Beijing today.
Residents visit a housing
exhibition in Shanghai in this photo taken on June 12, 2006.
[newsphoto] | The regulations may threaten plans by investors including Citigroup Inc. and
Morgan Stanley to increase holdings of Chinese real estate after Shanghai
housing prices more than doubled since 1999. Premier Wen Jiabao has curbed
lending to cool an economy that grew 10.3 percent in the first quarter and to
prevent a drop in property prices from causing loan defaults.
"The government is worried that overseas investment is bringing too much
foreign currency into China and that it will cause property bubbles,'' said Liu
Yang, who helps manage $3 billion of Asian assets at Atlantis Investment
Management Ltd. in Hong Kong. "But people are buying because they see real
growth prospects and real returns from Chinese real estate.''
Policies to cool foreign property investment come amid a raft of other
measures Wen is implementing to cool a credit-fueled investment boom driven by
swelling inflows of foreign capital.
China's reserves of foreign currency have doubled over the past two years to
$875 billion as the trade surplus widened, leaving the financial system awash
with cash. The government's policy of controlling the yuan's gains against the
dollar forces the central bank to issue treasury bills to soak up surplus funds.
The International Finance News said in early June the State Administration of
Foreign Exchange may use "technical'' restrictions such as tightening
transaction settlement procedures and strengthening supervision of real estate
companies receiving foreign funds or listing overseas.
With foreign investors poised to pour billions of dollars into Chinese real
estate, restricting investment from overseas could help slow growth in foreign
exchange reserves and ease pressure on property prices.
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