[photopress:real_estate.gif,full,alignright]The State Administration of Foreign Exchange (its acronym is ‘SAFE’ which is splendidly fortuitous) has issued an internal document entitled Circular of the General Affairs Department of SAFE on the Distribution of the List of the First Group of Foreign Invested Real Estate Projects which has Filed with the Ministry of Commerce (Hui Zong Fa  No. 130).
For the purposes of simplicity and because life is too short we will refer to it as Circular 130.
It exists, it has gone to all the offices of SAFE but it has not yet been officially published. Although, technically, this is not a regulation, it will be implemented by SAFE so it is just the same as a regulation.
Highlights of Circular 130
1. SAFE will not register any foreign debt of a foreign-invested real estate enterprise (and here we get another splendid acronym FIRE) if filed after June 1, 2007. Even if the FIRE was established and approved before June 1, 2007 it cannot its registered capital. This means that shareholders in FIREs may only invest by way of equity. Registration of foreign debt (including third-party loans and shareholder loans) will not be allowed.
2. SAFE will not process any foreign exchange registration (or amendment of registration) or foreign exchange settlement for capital account items.
Circular 130 should be read in conjunction with another grabber of a title, The Notice Concerning Further Strengthening and Regulation of Examination, Approval and Supervision of Direct Foreign Investment in Real Estate Sector which was issued in May and is known as Circular 50.
Basically what it about is yet another measure by the Chinese government to cool down foreign investment in its real estate market. This time it may get serious.
Foreign investors may lose some of their the ability to invest in new projects and may also lose an important means for remittance of funds offshore in ways other than as dividends out of earnings and surplus.
The government does seem to be playing this hand very well. It is taking new steps, almost every week, to cool down the money supply and, at the same time, is making foreign investment in real estate somewhat less attractive, slightly more difficult. Trying to take some of the hot air out of the bubble without actually bursting it.