Realty sector needs reality check

Owing to the negative growth of foreign direct investment (FDI) in successive months, the Ministry of Commerce and/or possibly some other departments are reportedly thinking about ways to continue to attract foreign investors. Though officials fail to clarify how and on which fields, reports are that one of the possibilities is to ease the country's limits on foreign investment in the real estate industry.

The possibility, if it turns out to be true, will benefit foreign investors to enter China's profitable property market. According to the definition of the National Bureau of Statistics, real estate falls in the category of investment items and, therefore, is subject to some restrictions on foreign capital inflow, as is the case in many other countries.

The document No 171, jointly promulgated by the then Ministry of Construction and other five government agencies in 2006, was exactly for this purpose. However, the Beijing and Guangdong authorities have gradually relaxed the restrictions in an effort to sustain their steady economic growth. This has been going on since last September when the central government began to reverse polices in the wake of the global financial tsunami. Available evidence indicates that both the central or local governments are weighing possible suspension of policy limitations on foreign investment in real estate and pave the way for their entry.