The Future of Real Estate & Construction in China

The last few years in China have seen what was once a very liberal real estate market close up against foreign investment – a reaction by the government to the overheating of the market in general and increased foreign investment in particular.

New regulatory controls have been focusing on foreign investment because, according to Edward Epstein of Troutman Sanders, “it is more difficult for the government to control foreign investment in the macro-economy. Local investors can be controlled though the banking systems using lending policy requirements, but where foreign equity is being used, the government has no control at all through the macro-economy, they have to use the regulatory environment.”

New rules and regulations designed to cool down the market were introduced, e.g. Circular 50, which announced that any foreign-invested company investing in real estate or developing real estate would have to have its project filed in Beijing, and Circular 130, which prevents foreign investors from using borrowed foreign exchange to invest in real estate in China. These have been effective in terms of making it difficult for foreign investors to enter the market and for existing players to expand, says Eric Rosedale of Salans.