China has banned foreign capital-invested property companies from borrowing yuan loans offshore, Shanghai Securities News reported yesterday.
Funds in yuan start-up accounts from foreign investors can’t be used to bid for land or buy property, the newspaper said, citing a notice from the People’s Bank of China, without saying where it obtained the document.
China formalized rules for allowing foreign direct investment (FDI) with yuan raised offshore in October last year, but hasn’t imposed a ban on funds going into property. Foreign direct investment rose 9.7 percent last year from 2010, while FDI in real estate jumped 12.1 percent, according to the Ministry of Commerce.
“China started to welcome more foreign capital, but not really the inflows to the real estate market,” said Shen Jian-guang (沈建光), a Hong Kong-based economist at Mizuho Securities Asia Ltd. “Developers may raise prices when cash flow improves with help of foreign capital. This is not what the government wants to see.”
Chinese Premier Wen Jiabao (溫家寶) restated over the weekend that that government must “unswervingly” continue its property controls and prevent prices from rebounding. China’s two-year effort to curb the property market has included raising down payment and mortgage requirements and imposing home purchase restrictions in about 40 cities.
China stepped up ownership curbs for foreign homebuyers in 2010. It ordered first-time foreign homebuyers to show proof they don’t own other properties in the country, while foreign companies are only allowed to buy offices in cities where they are registered, the housing ministry said.