Laws of the People's Republic of China

Circular of the Ministry of Commerce and the State Administration of Foreign Exchange concerning Further Strengthening and Standardizing the Examination and Approval of Foreign Direct Investment in Real Estate Industry

Shang Zi Han [2007] No.50

The authorities responsible for commerce and foreign exchange in all provinces, autonomous region, municipalities, and cities specifically designated in the state plan, and Xinjiang Production and Construction Corps:

Six departments of the State Council (namely, Ministry of Construction, Ministry of Commerce, National Development and Reform Commission, People's Bank of China, State Administration for Industry of Commerce and State Administration of Foreign Exchange) jointly issued Opinions on Regulating the Access to and Administration of Foreign Investment in the Real Estate Market (Jian Zhu Fang [2006] No. 171, hereinafter referred to as the Opinions) for the purpose of standardizing foreign fund access to and administration of real estate market. The local authorities strictly implemented the prescriptions and requirements in the Opinions and made some substantial achievement. However, some problems still remain in some regions. In accordance with the laws and regulations of foreign investment and the relevant prescriptions in the Opinions, the relevant particulars concerning further strengthening and standardizing the examination, approval, record for file and supervision of foreign investment in real estate are hereby notified as follows:

1.

The local commerce authorities shall strictly implement the Opinions and the Circular of the General Office of the Ministry of Commerce concerning Implementing Circular concerning Standardizing Foreign Fund Access to and Administration of Real Estate Market (Shang Zi Zi [2006] No. 192), strengthen the examination, approval and supervision of foreign-funded real estate enterprises, and strictly control foreign investment in top grade real estate.

2.

Foreign-funded investment in the development and operation of real estate market shall observe the principle of project company.

(1)

In the case of applying for opening a real estate company, the right of land use and ownership of real estate building, or the booking sale/purchase of land use or real estate right signed with land administration authority, land developer/ the owner of real estate building. The examination and approval authority may not approve it if the aforesaid requirements are not met.

(2)

Should such enterprises as have established new-added real estate or business of foreign-funded enterprises, and as are engaged in the development and operation of new real estate project, the enterprises hereof shall, in light of the relevant laws and rules, apply to the examination and approval authority for the relevant procedures concerning increasing business scope or extending business scale.

3.

The merge and acquisition or investment in domestic real estate enterprises by means of return investment (including the same actual manipulator) shall be strictly controlled. Foreign investor may not alter the means of actual manipulator of domestic real estate enterprises, evade the examination and approval upon foreign-funded real estate. Should the foreign exchange authority discovers the foreign-funded real estate enterprises established by such means as deliberate evasion and false statement, the authority hereof shall investigate it for remitting capital and the additive yield of its own accord to evade foreign exchange responsibility.

4.

Foreign investor engaged in domestic real estate development or operation shall abide by the principle of business existence, lawfully apply for establishing foreign-funded enterprises in real estate and engage in the relevant business in accordance with the approved business scope. The Chinese and foreign parties to the foreign-funded real estate enterprise shall not conclude the clauses guaranteeing fixed return or the fixed return in disguised form of any party by any means.

5.

The local authority responsible for examining and approving the establishment of foreign investment shall record for file in the Ministry of Commerce.

6.

The authority responsible for foreign exchange administration and designated foreign exchange bank shall not handle procedure of settlement, sale, and remittance of capital exchange for such foreign-invested real estate enterprises as have not completed the procedure of record for file in the Ministry of Commerce or have not passed the joint annual inspection upon foreign-funded enterprises.

7.

With regard to the foreign-funded real estate enterprises examined and approved by local authority hereof against the law, the Ministry of Commerce shall investigate and rectify it, the authority of foreign exchange administration shall not handle such procedures as foreign exchange registration hereto.

Ministry of Commerce

State Administration of Foreign Exchange

May 23, 2007