VZCZCXRO3571
RR RUEHCN RUEHGH
DE RUEHBJ #5592/01 2090650
ZNR UUUUU ZZH
R 280650Z JUL 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC 2563
INFO RUEHGH/AMCONSUL SHANGHAI 5387
RUEHSH/AMCONSUL SHENYANG 6634
RUEHGZ/AMCONSUL GUANGZHOU 1156
RUEHCN/AMCONSUL CHENGDU 6865
RUEHHK/AMCONSUL HONG KONG 7903
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 BEIJING 015592 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS USTR FOR 
USDOC FOR 4420/ITA/MAC/ 
TREASURY FOR OASIA/INA - DOHNER/KOEPKE 
 
E.O. 12958: N/A 
TAGS: ECON EIND CH
SUBJECT: CHINA/REAL ESTATE: SIX MINISTRIES ISSUE 
MEASURE RESTRICTING FOREIGN INVESTMENT INTO REAL 
ESTATE 
 
 
¶1.  (U) SUMMARY: On July 24, the Ministry of 
Construction (MCon), Ministry of Commerce (MOFCOM), 
National Development and Reform Commission (NDRC), 
People's Bank of China (PBOC), State Administration of 
Industry and Commerce (SAIC), and State Administration 
of Foreign Exchange (SAFE) jointly issued their 
"Opinions on Regulation of Approval and Administration 
of Foreign Investment in the Real Estate Market."  The 
objective of this measure is to strengthen regulatory 
and administrative controls on foreign individuals and 
institutions that operate and develop real estate (RE) 
in China.  The real estate measure consists of four 
parts: regulation of approval of foreign investment; 
strengthening the administration of FIE development 
and operation; strict administration of purchases by 
foreign individuals and institutions; and strict 
adherence to monitoring regulations.  End Summary. 
 
-------------------- 
New Measure, Part 1 
-------------------- 
 
¶2.  (U) The measure's first part regulates approval of 
foreign investment in the RE sector.  The requirements 
are: 
 
-- To invest in non-private property, one must 
establish a foreign invested enterprise (FIE). 
-- For projects over USD 10 million, one must have 50 
percent registered capital; for projects under USD 10 
million, adhere existing provisions. 
-- Before starting business operations, one must 
obtain proper government certificates and licenses 
from all relevant government offices. 
-- For all transfers of equity in RE, one must get 
approval from relevant government offices. 
-- When making equity transfers from other FIE's or 
Chinese companies to a FIE, the FIE is responsible for 
all debts and payments from the transfers, and must 
pay in one lump sum. 
 
--------------------- 
New measure, Part 2 
--------------------- 
 
¶3.  (U) The measure's second part strengthens 
administration of how FIEs develop and operate in the 
RE sector.  The requirements are: 
 
-- FIEs must have all proper certificates and licenses 
to conduct activity in RE. 
-- FIEs may not borrow domestic or foreign loans if 
either: they do not get necessary licenses and 
certificates, or they do not have 35 percent of the 
total capital needed for construction. 
-- There can be no contractual guarantees of fixed 
returns on investment. 
-- FIEs must adhere strictly to all relevant RE 
regulations. 
-- All relevant authorities must strengthen monitoring 
of real estate FIEs. 
 
-------------------- 
New measure, Part 3 
-------------------- 
 
¶4.  (U) The measure's third part calls for strict 
administration of RE purchases by foreign individuals 
and institutions.  The requirements are: 
 
-- Institutions and individuals with one year of 
residency may purchase property for private use. 
Overseas Chinese and residents of Hong Kong, Macau, 
and Taiwan are exempt from this stipulation for 
property within a certain size. 
-- Relevant authorities must authorize and register 
property for private use. 
-- The foreign exchange administration authority must 
verify all formalities and requirements for RE funds 
 
BEIJING 00015592  002 OF 002 
 
 
entering and exiting China. 
 
-------------------- 
New measure, Part 4 
-------------------- 
 
¶5.  (U) The measure's fourth part requires all levels 
of government to adhere strictly to monitoring RE 
regulations.  All levels of government must: 
 
-- Closely monitor RE investment. 
-- Not give preferential policy to real estate FIEs. 
-- Review previously issued preferential policies. 
 
-------------------------------------------- 
Comment: The meaning behind the new measure 
-------------------------------------------- 
 
¶6.  (U) This measure is one in a series of measures 
directed at controlling what many view as an 
overheating RE market.  Prior measures also dealt with 
macroeconomic controls, but this one specifically 
targets foreign investment.  In the media and official 
public statement, the "overheating" of the RE market 
is frequently blamed on foreign investment.  Embassy 
will track this development and provide subsequent 
reporting. 
RANDT