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Insights

tomorrows global business

David Blumenfeld and Paul Guan

March 06, 2017

By Paul Hastings Professional

David A Blumenfeld

David Blumenfeld and Paul Guan

In the past year, the Chinese government accelerated the liberalization of regulatory barriers to foreign investment, including foreign investment in domestic real estate.

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Over the past decade, foreign real estate investment has been subject to significant restriction and scrutiny. Foreign investors were concerned about receiving the necessary approvals and—even if deals were likely to be approved—their timing. In a recent regulatory change, now foreign real estate investors are only required to file at the local counterpart of the Ministry of Commerce, except for investments in restricted sectors such as large theme parks and prohibited investment sectors such as golf courses. This is a much more streamlined process, and significantly reduces the time between the execution of definitive documents and transaction closing—from two-to-three months to potentially less than one month. Now, the challenge for foreign investors is increasingly the same one they face in other markets: finding good deals.

China’s outbound real estate investment is subject to the same macroeconomic forces described above, which have somewhat opposite effects on the ability to receive approval to make these investments as the government makes efforts to restrict outbound investments and limit capital outflows. Notwithstanding additional scrutiny of outbound capital flows, we expect Chinese institutional investors to continue to pursue outbound investments. The Chinese pursuing outbound real estate investments are some of the largest institutional investors in the world. As they continue to invest, their level of sophistication is steadily increasing and, with it, their investment appetite is broadening on both a geographical and real estate sector basis.