'Restricted' list narrows investment scope

Updated 2017-08-22 09:32:31 Global Times

Real estate, hotels targeted for closer scrutiny, control

Corporate overseas investment in real estate, hotels and other related sectors is facing a new roadblock after the Chinese government put those sectors on a "restricted" list released recently.

The list, compiled by such bodies as the People's Bank of China (PBOC) and the Ministry of Commerce (MOFCOM), was posted on the website of the State Council, China's cabinet, on Friday.

Leading the list of restricted sectors is real estate.

Zhang Ning, a research fellow at the Chinese Academy of Social Sciences, said that before 2015, overseas property investment had a steady yearly growth rate of about 30 percent. But there's been a lot of volatility since, with investment surging in 2016 and plunging this year.

Investment in overseas commercial and residential property surged about 53 percent year-on-year to about billion in 2016, according to a report by the Xinhua News Agency on Monday.

But there was a dramatic turnaround in the first half of this year, when overseas investment in the real estate sector plunged by more than 82 percent year-on-year, the MOFCOM noted in a report on July 13.

"Government controls should have been behind this plunge," Zhang told the Global Times on Monday.

The Global Times asked several domestic real estate giants how the new restrictions will affect their overseas property investment strategies.

Most Chinese real estate companies have been exploring overseas property projects in recent years.

A PR representative from China Vanke Co declined to comment on the issue, but stressed to the Global Times on Monday that Vanke's overseas property projects are "limited in scale" compared with other domestic real estate companies.

Country Garden, which bought a residential land site in Australia in July, didn't respond to an interview request as of press time.

Hui Jianqiang, research director with real estate information provider Beijing Zhongfangyanxie Technology Service, said that the fever for overseas property investment persists in China as domestic companies try to diversify and policies tighten in the nation's property market.

"The restrictions will cause overseas property investment to cool a bit, but if the domestic real estate bubble gets bigger, investors will still turn their eyes abroad," Hui told the Global Times on Monday.

Apart from real estate, the guidelines also restrict investment in other businesses such as hotels, movie centers and sports clubs, while restricting domestic investors from setting up equity funds or investment platforms that aren't connected to industrial projects.

Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, said that restricting investment does not mean that the investment channels are totally blocked.

"Overseas investment in those areas used to be very flexible. Now those overseas investment projects will be under scrutiny. But I think the government would still give a green light to projects falling under the restrictive categories that are really good, particularly those related to the 'Belt and Road' initiative," Bai told the Global Times on Monday.

"The government wants to direct overseas investment to benefit the country's economic transition, such as investment in rare resources. But sectors like entertainment and property don't fall in this category, not to mention they are risky and carry a lot of uncertainty," Bai said.

The government also clarified the "forbidden zone" for overseas investment, which includes gambling and pornography.

The Chinese government released two guidelines earlier this year to standardize overseas investment by centrally administered enterprises and State-owned enterprises.

In 2016, domestic parties invested as much as 1.13 trillion yuan (9.4 billion) in about 7,900 companies in 164 countries and regions, increased 44 percent on year-on-year basis.

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