China clamping down on investment outflow

The Chinese have been known to be big spenders in many real estate markets worldwide, thus the recent clamping down on investment outflow by the Chinese government has markets all over the globe in a little bit of a tizzy as Chinese buyers are now finding it increasingly more difficult to transfer funds out of China in payment for the properties they have previously purchased. In an announcement on Dec 31, the State Administration of Foreign Exchange (Safe) stated that all buyers of foreign exchange must now sign a pledge to not use their US$50,000 quota for offer shore property investment.

SydneyCondoDarlingSquareThis may put a crimp in things as many real estate markets may find themselves missing out on this potentially huge audience pool as Chinese buyers are now shying away from foreign investments due to the difficulties involved in trying to bring their monies offshore. While the move may not deter the major buyers, first-time buyers with a lack of offshore assets and expertise in capital-manuvering may be forced to relinquish their offshore real estate purchases despite having already made deposits of previous scheduled payments.

Those who violate the new ruling may be denied access to foreign currency for up to 3 years, be added to a government watch list and may be investigated for money-laundering. The regulation also applies to companies with corporate outflows, requiring them to provide clear documentation with regards to outbound monies. The use of foreign currency for real estate has always been banned, but the authorities are serious this time, as seen in their request for additional documentation.

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