Looking for new opportunities

China Law & Practice's Annual Review was released at the Awards Ceremony in Beijing this month. Part of the Annual Review comprises insights from leading lawyers. It also includes analysis of the most important news stories of the year. Please click here to view the Annual Review on issuu.

1. What important legislation and policies on foreign investment in the real estate sector have been issued in China during the past year?

With respect to foreign exchange control, the Circular on Further Improving and Revising the Foreign Exchange Control Policy on Direct Investment (Hui Fa [2012] No.59) issued by the State Administration of Foreign Exchange improves the manner of exchange control relating to direct investment by eliminating and revising certain administrative permission items relating to exchange control in respect of direct investment. The major changes relevant to foreign investment in real estate are: (1) elimination of approvals for reinvestment by foreign investors of income lawfully derived in China; (2) simplification of foreign exchange registration procedures for foreign investment in respect of the acquisition of the equity of the Chinese party by the foreign investor; (3) elimination of approvals for the purchase of foreign exchange for overseas payment in connection with direct investments; and (4) permitting foreign-invested enterprises to issue loans to their offshore parent companies, with the limit on such loans not to exceed the sum of the profits distributed to the foreign investor but not outwardly remitted and the proportion of the retained profits to which the foreign investor is entitled.

Furthermore, this year, the State Council has determined five policy measures relating to real estate control (the new five measures), the main contents of which include: (1) improving the responsibility system for the task of stabilising housing prices; (2) resolutely suppressing speculative purchase of premises; (3) increasing the supply of ordinary commercially developed housing and land; (4) accelerating the planning and construction of low income home ownership projects; and (5) beefing up market oversight. Medium-sized and large municipalities, such as Beijing, Shanghai, Guangzhou and Shenzhen have also issued local implementing rules for the new five measures. Following the successive issuance of the new five measures and the local implementing rules, housing prices and purchases have been suppressed to varying degrees, thereby affecting the investment by foreign-invested real estate enterprises in housing projects and causing a diversion of these investments into commercial property, industrial real estate projects, logistics real estate.