According to a report by Shanghai Securities News,
overseas capital has not been carefully watched over as a source of
funding for real estate development.
But it was understood that China's Securities for Foreign
Exchange Administration (SAFE) has begun to strengthen its
supervision in this arena and it is probable that strict rules
against foreign speculation in real estate will be enacted in short
order.?
In the second half of April, SAFE's capital account supervisory
deputy chief Sun Lujun said that SAFE has been on a high state of
alert regarding the sharp increase in foreign capital in China's
property market and "other investments" and is actively discussing
appropriate countermeasures.
Prior to this remark, statistical bureau spokesperson Zheng
Jingping has publicly called for the appropriate adjustment of
policies governing the direct entry of foreign capital into real
estate arenas.
Afterwards, in the end-of-April SAFE International Balance of
Payment Annual Report, mention was made of the high-level attention
paid to the role of foreign capital in China's property markets in
order to "preserve the economic and financial security of the
nation."
Statistics show that in 2005, foreign capital bought US$3.4
billion worth of Chinese property. However, due to imperfections in
methods of collecting these statistics, a large amount of foreign
funds invested in China's real estate have escaped recognition and
the latter has directly contributed to the endless rise in China's
property prices.
Numerous Chinese scholars have called for tighter controls by
supervisory departments of these "back-door" entries into China by
foreign capital through real estate investments.
Some scholars warned that the entry of foreign capital into
industries during their inflationary stage would accelerate the
formation of bubbles and the subsequent withdrawal of foreign
capital could trigger financial panics, leading to the bursting of
these bubbles.
?
(China News Service June 3, 2006)