More Hong Kong developers are faced with the complexity of remitting funds as they increase their involvement on the mainland to make up for limited growth in the local market. Last month, the mainland newspaper 21st Century Business Herald reported Sino Land's alleged failure to remit on time the balance of a 4.18 billion yuan payment for a Chongqing site it won in a bidding in July last year. That meant the developer was unable to complete the deal. The report said Sino Land had paid only 1.4 billion yuan as of January 23, even though it was supposed to have settled the transaction one month after the auction. A Sino Land spokesman denied the report, saying the firm had fully paid the land price. In the original plan, Sino Land was to own 50 per cent of the project while Chinese Estate and CC Land were to hold 25 per cent each. Foreign developers have to settle the land price in yuan, but they can only set up a mainland subsidiary to conduct remittances after buying the land, said John Gu, principal of China taxation at KPMG. Foreign developers who buy a lot at an auction are required to set up a foreign-invested venture to settle the land price. The venture usually needs to file proceedings with the State Administration of Foreign Exchange and the Ministry of Commerce and get approval from local bureaus. Those who already have mainland investments can settle through subsidiaries established earlier. However, they need to obtain clearance from authorities to raise their registered capital for bigger projects. Circular 130 issued in July last year by the administration, which imposed tighter restrictions on foreign debt, is a major hurdle for foreign developers. Under the policy, foreign partners of real-estate firms set up after June 1 last year may only invest by way of equity. Registration of foreign debt is not allowed.
