On 11 July 2006, the Opinions on Regulating Market Entry and Management of Overseas Investment in Real Estate Market was introduced jointly by six Ministries of the China Government. In September, another policy document, the Notice on Regulating Foreign Exchange Management in the Domestic Real Estate Market was released by the State Administration of Foreign Exchange and Ministry of Construction. This new round of policies indicates that the Central Government's macro control has for the first time expanded to the restriction on overseas capitals entering the domestic real estate market.

Upon its publication, this so-called “Restriction on Overseas Capitals” policy has drawn much attention from overseas investors. However, as many implementation details at the local level have not been released yet, most of the overseas investors still feel rather confused with the current situation. The most commonly asked questions include:

•  What is the local governments' response to this policy?

•  Has there been any substantial change in terms of procedures and taxations for overseas capitals purchasing properties in the Mainland?

•  What kind of impacts may this policy have? How is the market response in different cities? and

•  What strategies should overseas investors adopt at this stage?

This report exactly attempts to address the above questions with the hope to help overseas investors have a better understanding of the policy itself and the most updated market situation.

—— Oct 2006