China raises scrutiny of property sector

BEIJING Wed Dec 22, 2010 6:25pm IST

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Construction workers erect scaffolding on a new residential building in central Beijing, September 10, 2010.

Credit: Reuters/David Gray/Files

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BEIJING (Reuters) - China will harden measures against speculation in its red-hot property market by intensifying scrutiny of foreign investment in the sector, according to a government website posting seen on Wednesday.

The Ministry of Commerce, which oversees foreign investment in China, said it would increase checks on property investment involving foreign currencies and ban foreign investors from betting on capital gains.

It did not elaborate on how the ban would be implemented. The statement was seen on the ministry's website (www.mofcom.gov.cn) for the first time and cited by several local news portals on Wednesday, but it was unclear why it was dated Nov 22.

Analysts said the remarks suggested the government was sharpening its rhetoric against hot money inflows into the property sector.

"The measures are the same as before, but the rhetoric is more serious," said Chen Dong, a property analyst at BOC International in Shanghai. "Still, it will be difficult to stop hot money inflows."

China's buoyant property markets have for months unsettled the government, which is worried frothy prices will fuel inflation and a housing bubble that will eventually burst with negative consequences for the wider economy.

The government stepped up its measures to cool property prices in late September by ordering home buyers to pay higher down payments and mortgage rates.

Officials have also tried to staunch speculative investment funds from flowing into the country, with the Chinese foreign exchange regulator stepping up checks on cross-border capital flows.

"This is a reinforcement of rules originally issued in 2007. Some authorities loosened the implementation during 2008 and 2009 amid the global financial crisis," said Wu Tao, chief executive officer of Wins Investment in Beijing.

He added the latest move was also part of China's efforts to rein in foreign investors who are betting on a stronger yuan.

Many Chinese cities have revived their restrictions on foreign property investment in recent months by banning foreigners from buying multiple units, and requiring them to stay in China for at least a year before making purchases.

(Reporting by Langi Chiang and Koh Gui Qing; Editing by Benjamin Kang Lim and Alex Richardson)

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