Beijing may ease property rules for foreigners

The mainland may ease rules on foreign investment in the property sector as one of several ways to boost sliding foreign direct investment after the real estate bubble burst, according to a newspaper report.

Concerned about a further slump in foreign direct investment, the Ministry of Commerce had submitted proposals to the State Council for more measures to attract investment, the Beijing-based China Times, citing sources from the ministry, reported at the weekend.

The proposals, listing 42 rules covering tax, foreign exchange and regulatory supervision, call for an easier approval process for foreign investment.

One of the biggest changes is to loosen regulation on foreign investment in the property sector.

Other suggestions include giving foreign investors access to the high-technology industry and relaxing checks on individual foreign investment, the paper said.

Foreign direct investment in China, the world's third-biggest economy, dropped 17.8 per cent last month from a year earlier to US$6.38 billion, the eighth straight monthly decline amid the global recession. But the drop was less steep than in April, when inflows fell 22.5 per cent year on year.

In the first five months, foreign direct investment fell 20.4 per cent year on year to US$34.05 billion.

Law Ka-chung, the chief economist and strategist at Bank of Communications, said loosening regulations on foreign investment in the property sector would help to boost foreign direct investment quickly amid recovery hopes.

However, such foreign capital was mainly 'hot money' speculating on the rise in property prices, which was not something good for the real economy in terms of creating employment, Mr Law said.

He suggested that Beijing cut unnecessary fees and reduce red tape in the approval procedures, and improve its legal system, living environment and business environment to attract foreign investors.

Beijing introduced a package of policies to prevent the influx of foreign capital into the red-hot real estate market in 2006 and 2007. These included raising the ratio of registered capital in developers' overall investment and restrictions on residential purchases by foreign institutions and individuals, as well as tightening the approval and supervision of foreign investment in the sector.

However, the decline in property prices and transactions amid the economic downturn last year has prompted policymakers to consider relaxing controls to bolster economic growth.

On the decline

Foreign investment has been falling amid the global recession

Last month, investment inflows totalled US$6.38 billion, a fall of: 17.8%