China takes action to further control foreign-invested real estate industry

On May 23, 2007, the Ministry of Commerce and State Administration of Foreign Exchange jointly issue Notification on Further Strengthening and Standardizing the Examination and Approval of Foreign Direct Investment in Real Estate Industry. In accordance with the Notification:

A. the State will strengthen the examination, approval and supervision of foreign-invested real estate enterprises, and strictly control foreign investment in top grade real estate;

B. in case of applying for starting a real estate company, the land use right and the ownership of real estate building shall have been obtained or pre-contract on land use right assignment/real estate property purchase has been signed with land administration department or land developer/owner of real estate building. Otherwise the authority shall not approve the establishment of such foreign-invested real estate enterprise;

C. If the existing foreign-invested company wants to expand its business scope and engage in real estate development or operation, or foreign-invested real estate company wants to conduct new real estate project development. It shall go through relevant formalities as required by Chinese law and apply with the examination and approval authority;

D. The Chinese party and the foreign party to the foreign-invested real estate enterprise shall not conclude clauses which guarantee fixed return or fixed turn in disguised form for any party by any means;

E. The local authority responsible for examining and approving the establishment of foreign investment shall record the approved foreign-invested real estate companies for file at the Ministry of Commerce;

F. The authority responsible for foreign exchange administration and designated foreign exchange bank shall not handle procedure of settlement, sale and remittance of capital exchange for foreign-invested real estate companies who have not completed the procedure for record for file in the Ministry of Commerce or have not passed the joint annual inspection on foreign-invested enterprises.