The Chinese government in 2010 passed laws limiting the purchase of commercial and residential real estate by foreigners. The idea of the regulations was to slow down real estate speculation and control inflation.

The Wall Street Journal reports from Shanghai the effect of the new regulations would likely be small, since foreigners make up a tiny proportion of China property sales.

In a joint statement with the Ministry of Housing and Urban-Rural Development, the State Administration of Foreign Exchange decreed that-

• Foreigners can own only one residential property for their own use (permanent residents are restricted to two properties).
• Foreigners must reside in the country for one year before they can buy property.
• Foreign companies who buy commercial real estate must use it themselves.

Also driving the new regulations was the need to control “Hot money” in China. Hot money is speculative capital that evades regulators in China, which keeps tight controls on its currency.

Hot money that now comes to NZ and other countries.

Foreign investments accounted for 0.8% for property development in China last year, data from the National Bureau of Statistics showed.

So even when foreign real estate purchases in Red China are only a small part of the market, they are still tightly regulated.