- The circular requires new documents for improved government monitoring of compliance with existing rules
- New guidelines show the government’s intent to cool the overheated property market
On 15 November, the State Administration of Foreign Exchange and the Ministry of Housing and Urban-Rural Development Bureau issued a notice on property purchase by foreign individuals and companies (Circular 186). It has been generally viewed as clearly demonstrating the determination of the government to cool the property market.
However, this circular does not impose any additional substantial restrictions on foreign individuals and companies, but rather stipulates extra measures that the government must take for improved monitoring of compliance with the existing rules.
Previously, general requirements related to the purchase of property by foreigners were stipulated in the Circular on Regulating the Access to and Administration of Foreign Investment in the Real Estate Market issued on 11 July 2010 (Circular 171). Circular 186 specifies additional requirements for the purchase of property:
- Foreigners (excluding those from Hong Kong, Macau and Taiwan) must now provide proof of having worked in China for at least one year before the purchase and provide a written statement proving they do not own any other properties in the country when buying a new property;
- Foreign buyers from Hong Kong, Macau or Taiwan need to provide documentation to confirm they are working, studying or residing in China in order to purchase property;
- An official approval and registration certificate regarding the establishment of a subsidiary or representative office by a foreign company must be issued by the relevant government department; and
- A written statement must be issued by a foreign company providing that the purchased property is for the actual business operation in China.
Meanwhile, the circular states that the local foreign exchanges banks designated by the State Administration of Foreign Exchanges shall strictly handle the foreign exchange issues related to the purchase of property according to relevant regulation, and shall strictly examine and verify the documents submitted by foreign companies and individuals.
It would appear that Circular 186 is a reiteration of the existing Circular 171, and it seems to be focused on ensuring compliance with existing rules by individual or representative office buyers who are not required to receive approval from the Ministry of Commerce. Nothing new in this circular indicates that there is any impact on the foreign real estate investor who has received specific approval for a given real estate investment project.