Beijing shows no signs of loosening its capital controls on overseas investments even as more Chinese firms pour into the European and American real estate markets. “I don’t see any relaxation of policies. They’re still very strict,” said Paul Guan, a partner with global law firm Paul Hastings, which specialises in advising Chinese institutional investors on outbound real estate investments. The firm recently represented China Minsheng Investment Group’s property arm SRE Group, a Shanghai-based developer listed in Hong Kong, in its US$88 million acquisition of 75 Howard, a harbourfront condominium development in downtown San Francisco. The deal was completed last week and is the developer’s first project in North America. China has been implementing tough measures to restrict outbound investments in the face of accelerating capital outflows since late last year. The measures include banning overseas investments of more than US$10 billion, forbidding mergers and acquisitions worth more than US$1 billion that are outside a Chinese investor’s core business and halting foreign real estate deals by state-owned enterprises involving more than US$1 billion. China’s foreign investment ‘shopping spree’ over as Beijing moves to slash capital outflow But headline-grabbing cross-border deals have continued regardless. In March, Chongqing-based CC Land Holdings agreed to buy the Leadenhall Building in London, the Square Mile’s tallest tower known as the “Cheesegrater”, for £1.14 billion (US$1.5 billion). The deal marks the largest-ever Chinese purchase of British real estate. In the same month, Beijing Capital Development Holding (Group) made its third British investment, buying Free Place House, a London grade A office building, for £96.5 million. Mainland Chinese and Hong Kong investors were the biggest buyers of commercial properties in the City of London in the first quarter of 2017, according to Savills. I don’t see any relaxation of policies. They’re still very strict Paul Guan, partner, Paul Hastings But these transactions were not an indication that Beijing’s capital controls had been loosened, said Darren Xia, head of international capital group at JLL China. “The restrictions are still in place”, meaning those that could still shop overseas had a listed arm in Hong Kong or branches outside mainland China so they could use overseas proceeds or financing to fund the deals, he said. Xia said that even though many companies still maintained their overseas expansion strategy, they were keeping a “low profile” because it was a very sensitive topic at the moment. The policies were unlikely to be eased before China’s 19th National Congress this autumn, when the new leadership of the Communist Party would be elected, he added. Nevertheless, Chinese investors’ demand for offshore real estate assets remains strong on the expectations that the yuan will continue to depreciate and amid skyrocketing property prices at home. Chinese property investors still getting overseas deals done despite tighter capital controls, says ING Fujian developer Yuzhou Properties said over the weekend that it was actively seeking investment opportunities in Hong Kong and foreign countries to cater to the growing needs of wealthy mainland Chinese buying properties overseas. Despite increased government scrutiny, Chinese outbound real estate transactions soared 84 per cent in the first quarter of 2017 to US$7.5 billion from a year earlier, a report by JLL showed. But on a quarter-on-quarter basis, values were down 36 per cent, signalling an easing in demand amid the curbs. The report also said cross-border buyers were keen on office assets in the core central business district, retail malls and properties in niche sectors such as senior housing. Analysts added that an emerging trend in property investment was to target countries along President Xi Jinping’s “Belt and Road Initiative” such as Malaysia, India and Cambodia, a strategy that would receive policy support, making it easier to transfer capital overseas. Yet the recent activity was the tip of the iceberg in terms of demand as most overseas acquisitions by Chinese companies had stalled due to difficulties in bringing money out of the country this year, even when the amount was far below US$1 billion, Guan said.