China eases rules for foreigners in its real estate market amid worries over slow economic growth

The mainland has relaxed foreign investment restrictions in its once-sizzling real estate market as worries mount on capital flight in the wake of a weakening yuan and slowing economic growth.

Six governing ministries, including the central bank and the commerce ministry, issued a statement scrapping previous rules that required foreign property investors to pay the full amount of registered capital for their mainland entities to mainland authorities before borrowing any loans or applying for foreign exchange transactions.

"The move seems to be aimed at discouraging capital outflow after the devaluation of the yuan," said Alan Chiang, head of residential in the Greater China region for global property consultancy DTZ.

"The move will offer an alternative for foreign corporates to invest if the government decides to stop the capital outflow."

But as concerns about the mainland stock market and the yuan linger, many industry analysts wonder if such incremental policy relaxations will help.

The mainland drew 18.5 billion yuan (HK$22.3 billion) of foreign investment in the real estate sector in the first seven months of this year, down 24.5 per cent from a year earlier, according to the National Bureau of Statistics. The first half saw a year-on-year drop of 3.9 per cent, indicating a steep decline in July. Foreign capital accounts for less than 1 per cent of total real estate investment.